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by Vault Consulting Editors | December 18, 2007

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Booz Allen has been all the buzz over the past few days, after Financial Times Deutschland reported on Friday that the firm was in discussions regarding a possible plan to split the company into separate public-sector and commercial consulting businesses. A spokesman for the company confirmed that Booz Allen was considering the move, but insisted that the talks, for now, are "purely theoretical." The Washington Post reports today that in an email to employees, CEO and Chairman Ralph W. Schrader stated that the commercial and government units "have very different needs" and the "long-term success of our two major businesses -- and our clients and people -- could be enhanced by complete focus on their distinct markets." Schrader noted that the company is exploring its options and hopes to come to a final decision by March 2008.

Theoretical or not, the news of a potential sale/spinoff set off a rash of postings on the Vault Message Boards, unearthing mixed sentiments among readers. Much of the speculation revolves around the suggestion that the firm is considering selling its government business (which brings in the majority of the firm's revenue) to a private equity firm, and spinning off the commercial side. Some feel that the spinoff will hurt the commercial side, since almost 20% of that business is fueled by subsidies from the public-sector practice. As one reader notes, "The commercial biz is the Titanic, and this deal is an iceberg." In addition, there's speculation that the deal is being structured to heavily reward the higher-ups, based on ownership shares, and the proceeds wouldnt trickle down to those in the lower ranks who are driving performance. Others believe that, in the long run, the deal will benefit the commercial business, and predict that it may eventually evolve into a more exciting, performance-driven place. However, in the short term, should the deal go through, there may be less per-partner-profitability, leading to some trimming of the lower ranks; in fact, some competitor firms (BCG, Deloitte, McKinsey) have already begun swarming Booz Allen for spoils.

As for where this would leave the government side, it seems that it would be less dramatically affected. Most of the projects are long-term defense contracts that require less sales activity, so there's no worry that business will lag in the coming years. One poster suggests that to make money off of this purchase, a buyer would want fewer partners in the mix (to increase per-partner profits), which would regrettably lead to limited upward mobility for younger associates.

Regardless of where these talks are headed, what comes through on the message boards is a sense of nostalgia for the Booz Allen legend - a traditional, independent consultancy that affords unique learning opportunities to its consultants. Some consultants fear that once the government business is separated from the commercial side, it will become just another anonymous, corporate behemoth.

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Filed Under: Consulting

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