Sir David Walker, the man charged with bringing private equity out of the shadows, will produce his long-awaited recommendations today on what the industry must do to improve disclosure and transparency.
The report, which will be released at 12:00 London time, follows a four and a half month long enquiry by the Walker-led working party, which was brought together by the British Private Equity and Venture Capital Association.
Based on his comments at the recent UK Treasury Select Committee, Walker’s report is likely to recommend greater disclosure for large portfolio companies under private equity ownership, including the publication of an annual report within four months of year end with details of leverage structures and investor base.
He is also likely to suggest that private equity managers should improve their reporting to investors about fund and portfolio company performance, and talk more about their corporate values. The provision of better quality independent research is also likely to be considered.
However one adviser has warned the review must focus on the area of concern: mega buyouts. Mark Spinner, corporate partner and head of private equity at law firm Eversheds said: “We support the review and the focus it has on governance, but the majority of mid-market companies are acutely aware of the need to work with private equity companies to grow and expand their businesses. Any potential regulation of large deals will need to ensure that it does not add an unnecessary administrative burden or cut off mid market investment which provides vital support and funding for UK business.”
He said the mandatory appointment of independent directors on the boards of private-equity-funded companies – expected to be recommended by Walker – was not a material departure from current market practice. However he cautioned there was likely to be a fierce debate over what constitutes independence.
At the Treasury hearing, Walker robustly defended his independent status, even criticising the BVCA for the narrow terms of reference they had given him – which, he said, he had promptly ignored.
His comments will be eagerly awaited by the industry, which has latched onto Walker’s enquiry as its major defence to recent charges from press, politicians and trade unions that it operates in a secretive way, and must try harder to improve its public image.
Today’s report will form the basis of a consultation process that will eventually lead to a voluntary industry-wide code, which will be introduced on a “comply or explain” basis.
Stay tuned to PEO for further reaction to Walker’s recommendations later today.