EVCA criticism of Walker report could lead to “benchmark” status(2)

EVCA, the European trade body, has argued the UK private equity industry’s attempt at self-regulation, the Walker report, should address its reservations in order to become a “European benchmark”.

European trade body EVCA has expressed reservations about David Walker’s consultation document for his review of disclosure and transparency in UK private equity.

EVCA has set out several objections to the Walker report about the far-reaching scope of the report.

EVCA’s spokesman said “This report could become a benchmark worldwide as it is an important document. It is necessary before these guidelines are adopted across the rest of Europe that the document takes into account the different jurisdictions across the EU. The document is more likely to become a European benchmark if it addresses our concerns now.”

Walker’s report suggested new disclosure requirements for large portfolio companies – defined as companies formerly in the FTSE 250, an index of the UK’s biggest listed companies; companies with more than 1000 employees and a value of more than £500 million (€742 million; $1.02 billion); or companies where the deal price involves an equity consideration of more than £300 million.

Walker wants these large companies to publish an annual report within four months of their financial year-end, which outlines the composition of their entire board, details the level and structure of their debt, and talks about the company’s values and “role in the wider community”.

EVCA argues the Walker report’s proposals may unfairly hinder private equity houses which own large companies in comparison to hedge funds, banks, private individuals and quoted companies. However, Walker has said he believes the guidelines would be appropriate for any large private company and he has encouraged wholesale adoption.

The trade association is also concerned about the potential of the report to be applied to smaller companies. It would like to ensure the final report does not include small and medium sized companies within its scope. Walker’s definition should be sufficient but EVCA wants to be assured of this.

The industry spokesman said it has published guidelines to take into account the different legal and reporting guidelines across the EU. EVCA believes there is a risk the document could be standardised across Europe because of the momentum it has generated. This could lead to complications in the attempt to align some EU member countries more direct regulatory approach with the self-regulatory system proposed by Walker.

The finalised Walker report will be published on November 20. The consultation period for the report ended on Tuesday to coincide with the UK Chancellor of the Exchequer’s pre-budget report.

Walker declined to comment.