Transparency review gets guarded reception

Sir David Walker’s recommendations for improving transparency in private equity have received a largely positive reception from the industry, although not everyone was convinced.

The private equity industry has reacted with cautious optimism to Sir David Walker’s proposals to improve transparency, released for consultation today.

Industry participants welcomed the recommendations as a positive step, but suggested that the report – which covered several different aspects of the industry – was unlikely to remain unchanged following the three month consultation process.

Philip Buscombe, chief executive of Lyceum Capital said: “The impact of European directives (like Working Time, Agency Workers and Cross Border Mergers) and the changes in the new Companies Act will be much more far-reaching than Walker – but this is a good start.”

“The report will help to mobilise all four constituencies of the industry,” said Ian Armitage, chief executive of UK mid-market firm HgCapital. On the other hand, he said: “The proposals covered every acre possible, but I think it unlikely that the final code will be as broad or wide-ranging,”

One potential area for revision, he suggested, could be the proposed obligations on large private equity-owned companies to report like public companies. Although Walker framed this as a voluntary code for private equity, he also suggested it could ultimately be extended to other private companies too – a material change to their current obligations under UK companies legislation. “The business community has to think very carefully about whether this is a good or a bad thing,” said Armitage.

Armitage also suggested that the provision of more information about the industry’s value and CSR policies would be as unnecessary as it is in public company reporting statements. “It adds nothing to the debate,” he said.

However, he was extremely positive about Walker’s suggestion that the BVCA, the UK’s industry association, should help to co-ordinate a “centre of excellence” for the collection and aggregation of industry-wide performance data – possibly in conjunction with the current research facilities at Nottingham and London Business Schools.

BVCA chairman Wol Kolade insisted: “Thanks to the work of the BVCA, there is more industry-wide information available in the UK than in any other country, but we accept that there needs to be more. The BVCA will take the lead in considering how best to respond to that recommendation.”  Kolade described the report as “a clear and powerful document, which poses some real challenges for the larger buyout houses in particular”.

The code’s voluntary nature also met with approval.

Glyn Barker, managing partner, PricewaterhouseCoopers said: “By not recommending specific regulatory or legislative proposals on disclosure, we should avoid the risk of unintended consequences which could significantly undermine the positive economic impact of the private equity industry and the competitiveness of the UK.”

The trade unions were predictably more sceptical about the report. GMB general secretary Paul Kenny criticised the voluntary nature of the code, suggesting that Walker “thinks it is too much to ask the multi-millionaire elite who run this industry to conform to the “burdens” of complying with the reporting requirements of the Stock Exchange.” The industry clearly planned “to keep on doing what they were doing before they were rudely interrupted by GMB members,” he said.

However, he did agree with Walker on one point – that the unions would continue to scrutinise the industry closely.