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Carlyle makes significant investment in PA

andrew hill | financial times | 29 september 2015

Carlyle, the US private equity group, is to take control of PA Consulting, the British company specialising in technology, innovation and public sector work, to help it expand by acquisition.

Carlyle’s purchase of a 51 per cent stake in PA, to be announced today, would value the consultancy, which is owned by its 2,500 employees, at $1bn. The deal will require approval of a majority of the PA staff who own shares at a vote in November. The UK group stressed continued employee share ownership was an important feature of the transaction.

One reason for the deal is to give PA more firepower to attract and retain staff and to buy other groups.

Alan Middleton, PA’s chief executive, said: “The structure that we will put in place will give us the flexibility to go after the real big bears in the market. It will give us a few more rounds in our gun.” 

Consulting deals are notoriously difficult, particularly when two groups’ cultures clash, which has held back consolidation of midsized consultancies. However, Carlyle expects to maintain PA’s identity within its portfolio.

PA would be able to take advantage of Carlyle’s presence in North America and Asia to expand its business, as well as its strength in sectors such as aerospace, defence, energy, healthcare and government work. The deal will be carried out by Carlyle’s European Partners IV fund.

PA, which in 2014 generated fee income of £360m, was founded in 1943. Having vied with McKinsey, Boston Consulting Group and Bain to become a big global consultancy, it came close to collapse in the early 1990s.

Since then, it has evolved into a company that stresses its ability to develop products alongside its clients, including designing and building prototype production lines.

PA operates its own innovation centre near Cambridge and also offers traditional management consulting services such as strategy advice. Public sector work accounts for about half of PA’s revenues.

The group, which has an international network of offices, has been chaired since last year by Marcus Agius, former chairman of Barclays, who will continue at the head of a smaller board under Carlyle.

PA is not the first consulting group to be part of the Carlyle portfolio. In 2008, the US group acquired control of Booz Allen Hamilton, another consultancy with a strong list of public-sector clients. Booz Allen, which generates almost all its revenues from government business, including high-security work, went public in 2010 and the private equity group has gradually reduced its holding to a minority stake.

Booz & Co, its management consulting business, split from Booz Allen when Carlyle took over and stayed independent until it was bought by PwC in 2014 and rebranded as Strategy&.

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