Friday Letter: global reach

The UK’s Walker code should be firmly on the radar of all global buyout firms.  

General partners who have dismissed the UK’s “Walker code” as something that doesn’t affect them ought to give the matter some second – and serious – thought.

The guidelines developed by Sir David Walker, the former chairman of Morgan Stanley International, place reporting requirements on companies acquired in a public-to-private transaction with a market capitalisation at the time of acquisition in excess of £300 million (€400 million; $581 million), or in a secondary or other transaction with an enterprise value greater than £500 million.

Though this would apply only to companies that generate more than 50 percent of their revenues inside the UK and employ equivalent to more than 1000 full-time UK workers, the Walker guidelines reach far beyond UK shores.

Global buyout firms with satellite offices in London or that participate in or lead UK-based deals would be affected by the proposals. Indeed, among the firms that have signed up to comply with the Walker guidelines are many US-headquartered firms like Bain Capital, Kohlberg Kravis Roberts, Providence Equity Partners, Clayton Dubilier & Rice, The Carlyle Group and The Blackstone Group (though as PEO has learned in some cases not without significant internal debate with the pro-Walker charge led by London-based partners).

But even more importantly, industry-wide compliance with the guidelines could spark a sea change in private equity’s public perception. Where better to cultivate constructive public opinion than with the country whose labour unions have had the longest (and loudest) campaign against the buyout industry? Transparency, as many key industry figures have said, just may be the golden ticket.

KKR, Bain, Carlyle and Blackstone, as frequent targets of union-backed protests in the US, are all too aware of this fact. But other firms, regardless of size, strategy or geography, ought to follow their lead: adhering to the guidelines may effectively improve the asset class and its reception among all stakeholders.

Simon Walker, head of the British Venture Capital Association, reiterated this week, the private equity industry is “more likely to prosper if its economic contribution is publicly recognised and its investments do not cause suspicion or alarm in the wider community”. Indeed.