UK private equity firms were slightly less able to meet the transparency and disclosure recommendations set forth in the Walker Guidelines in 2015 compared to years past, according to the Private Equity Reporting Group’s (PERG’s) eighth annual report.
The Walker Guidelines are a set of voluntary standards aimed at firms involved in large UK buyouts. They operate on a “comply or explain” basis, and PERG (previously known as the Guidelines Monitoring Group) oversees compliance. PERG is part of the British Private Equity and Venture Capital Association (BVCA).
For the report, PERG reviewed 20 portfolio companies, and only 10 percent were judged to have achieved an “excellent” level of disclosure with the guidelines, compared to 16 percent in 2014. Moreover, 85 percent of the firms tested at “good” disclosure levels, but 5 percent were found to have only “basic” levels of disclosure. In 2014, none of the firms reviewed received the basic rating, the lowest rating available.
PERG attributes the small dip in performance to new guidelines it introduced in July 2014, which are taking time to implement, along with improvements in the quality of reporting within the FTSE 350, which is the benchmark for judging compliance.
Many of the portfolio companies in the sample did not address the new recommendations calling for disclosure on their business model, gender diversity and involvement in social, community and human rights issues. One of PERG’s recommendations for 2016 is that private equity firms and portfolio companies focus on disclosure in these areas.
However, disclosure on areas like key performance indicators and environmental issues significantly improved compared to the data from 2014.
In 2016, PERG plans to continue providing feedback to firms and portfolio companies to raise the levels of disclosure and adherence to the Walker Guidelines. The BVCA will join PERG in monitoring how best to assess compliance with the disclosure requirements for private equity firms.
As of December 2015, 65 UK firms are covered by the guidelines, up from 59 firms in 2014.