Ministry of Defence technology spin-off QinetiQ did not get the best value for money for the taxpayer, says the National Audit Office (NAO).

The company was created by a part-privatisation of the Defence Evaluation and Research Agency and 34 per cent was sold to a private equity firm, The Carlyle Group, for £125m in 2003. By the time of the 2006 stock exchange flotation, the value had shot up to £1.3bn, based on a 36 per cent revenue increase and a 261 per cent rise in profit.

But while the government views the QinetiQ sale as maximizing value, the NAO is not convinced, according to the report published this week.

"Our assessment of the outcome in terms of value for money is mixed," it says.

"We consider that more money might have been raised from the 2003 sale to Carlyle.

"The resulting business strategy, however, was instrumental in increasing the value of QinetiQ and the 2006 flotation maximised proceeds - in the long term, the value for money of the privatisation to the taxpayer will depend on a range of factors," it says.

The top 10 executives who led QinetiQ through the privatisation saw their initial investment of £537,250 rise to £107m at the time of the flotation.