On July 31, 2008, the Carlyle Group completed its acquisition of Booz Allen Hamilton's government consulting business in a transaction valued at approximately $2.54 billion. The Carlyle Group invested $910 million in equity to acquire a majority stake, while Booz Allen's commercial consulting business was spun off as a separate company renamed Booz & Company (later acquired by PricewaterhouseCoopers). The deal had been announced in May 2008 and represented a watershed moment in intelligence privatization: one of the world's largest private equity firms now owned one of the intelligence community's most embedded contractors.
Booz Allen Hamilton was not an ordinary government contractor. As of its 2012 annual report, the company had approximately 25,000 employees, with 76% holding U.S. government security clearances and 49% — roughly 12,250 people — holding clearances at the Top Secret level or above. This meant a single private equity-owned corporation had more employees with Top Secret clearances than many intelligence agencies. Booz Allen's employees sat inside the NSA, CIA, DIA, and virtually every other intelligence agency, performing work indistinguishable from that of government employees. The company generated approximately 99% of its revenue from U.S. government contracts, with intelligence and defense work comprising the overwhelming majority.
The Carlyle Group brought its own controversial history to the acquisition. The private equity firm had long been associated with the revolving door between government and the defense industry, counting among its advisors and executives former President George H.W. Bush, former Secretary of State James Baker, and former British Prime Minister John Major. Critics noted the firm's connections to Saudi investors and its extensive defense portfolio.
The acquisition created a troubling new model: a private equity firm — accountable to its investors for returns — now controlled a company whose employees had access to the nation's most sensitive intelligence. The profit motive of private equity, with its emphasis on cost-cutting and revenue growth over a relatively short investment horizon, was now structurally embedded in the intelligence community. Carlyle would take Booz Allen public in 2010 at an $8.5 billion valuation, tripling its investment — returns generated almost entirely from taxpayer-funded intelligence contracts. When Edward Snowden, a Booz Allen employee of less than three months, leaked the NSA's most classified programs in 2013, the acquisition's security implications became undeniable.