May 16 (Bloomberg) -- Carlyle Group, the private-equity firm run by David Rubenstein, agreed to acquire Booz Allen Hamilton Inc.'s U.S. government-consulting business for $2.54 billion, its biggest buyout since the credit markets collapsed in July.

Booz Allen, based in McLean, Virginia, will split off its corporate-consulting unit into a separate company, Carlyle said today in an e-mailed statement. Booz Allen Chief Executive Officer Ralph Shrader will run the Carlyle-owned entity focused on government clients. Carlyle and Booz Allen had been in talks since at least January.

The purchase would be Carlyle's biggest since it agreed to buy nursing-home operator Manor Care Inc. last July for $6.3 billion. Deal-making may be rebounding from a 68 percent decline in the first quarter as investment banks begin writing new commitments for private-equity transactions. Buyouts ground to a halt last year because of a global credit freeze triggered by record U.S. subprime-mortgage defaults.

``The private-equity firms are not going away,'' said Steven Kaplan, a professor of finance at University of Chicago Graduate School of Business. ``They have too much capital.''

The Booz Allen government-consulting unit has more than 18,000 employees and annual sales of more than $2.7 billion. Its clients include branches of the U.S. military, the Department of Homeland Security and the World Bank.

Government Ties

Carlyle, based in Washington, manages $81.1 billion in assets. Rubenstein founded the firm in 1987 with William Conway and Daniel D'Aniello. The trio initially focused on deals tied to government and defense.

Carlyle and closely held Booz Allen have attracted high- level officials from the government. Carlyle's senior advisers have included former President George H.W. Bush, former British Prime Minister John Major, and Arthur Levitt, the ex-chairman of the U.S. Securities and Exchange Commission.

R. James Woolsey, who led the U.S. Central Intelligence Agency from 1993 to 1995, is a Booz Allen executive. Mike McConnell, the U.S. director of national intelligence, is a former senior vice president with the company.

Carlyle last year sold a minority interest in itself to Mubadala Development Co., an investment fund affiliated with the government of Abu Dhabi, capital of the United Arab Emirates.

Carlyle said today it will have no management role or access to any classified information at Booz Allen.

More Deals

Carlyle had turned real estate investments as the market for large leveraged buyouts waned. The company acquired a Manhattan building last month for $650 million and is set to buy a stake in the retail portion of another for $525 million. Carlyle raised $3 billion for a U.S. real estate fund last year.

Private-equity executives are increasingly optimistic about doing more buyouts. The firms are eyeing transactions around the size of Carlyle's, as well as minority stakes that require less debt, said Chip MacDonald, a partner with Jones Day in Atlanta.

``There is a lot of pent-up demand,'' MacDonald said in an interview. ``People will move down market because there's a huge need that's unmet.''

Blackstone Group LP Chief Executive Officer Stephen Schwarzman told investors yesterday the financial markets were showing ``signs of recovery.''

Credit Suisse Group AG and Latham & Watkins LLP advised Booz Allen on the sale. Debevoise & Plimpton LLP provided legal advice to Carlyle.

To contact the reporter on this story: Jason Kelly in New York at jkelly14@bloomberg.net

Last Updated: May 16, 2008 13:39 EDT