Non-Subscriber Extract
Parliamentary committee censures QinetiQ privatisation
By Gerrard Cowan
10 June 2008
The privatisation of the UK's QinetiQ was undermined by "profiteering" on the part of its management, the House of Commons Committee of Public Accounts has concluded.
In a report published on 10 June, the committee said the UK Ministry of Defence (MoD) could have made an extra GBP90 million (USD177 million) on its GBP319 million sale of QinetiQ to private equity firm Carlyle. The bulk of this waste came from the high proportion of the company's equity that was made available to staff. Carlyle initially suggested making this 10 per cent. However, following negotiations with QinetiQ management, it was raised to 20 per cent. If it had remained at 10 per cent, the MoD would have seen additional proceeds of GBP76 million, the report said.
Secondly, a general growth of the market between the 2003 sale and the 2006 flotation greatly inflated the returns to management. If the incentivisation scheme had been structured differently, there could have been additional proceeds of up to GBP9 million.
QinetiQ responded on 10 June by "strongly refuting any accusation that members of [QinetiQ's] senior management team acted inappropriately".