Sir David Walker has dismissed criticism of his final recommendations in his report into disclosure and transparency in private equity, revealed today after a three-month-long consultation.
Walker said he had decided to give the British Private Equity and Venture Capital Association (BVCA) a greater role providing data on the industry. He had rejected the need for two bodies overseeing private equity and venture capital, a proposal he had considered, although he said the BVCA must “raise its game” in its expanded role.
The new body set up yesterday to check compliance with the report would be “fiercely independent” under the leadership of BT chairman Sir Mike Rake, Walker said.
Walker said it was not his role to assess the benefits of private equity in comparison with other methods of ownership, but to make sure better quality research was produced to enable debate. The BVCA should do this with extra funding, he said.
He said conformity with the report “could by assured by peer group pressure on any recalcitrant, as disrepute will be bought on the whole industry by any group that doesn’t conform.” The monitoring group would substantially meet the sanctions called for by critics of the original report, he said.
Walker recommended the BVCA to sign up sovereign funds in a new category of membership. The Qatari Investment Authority had already signaled its assent to the proposals when its investment firm Three Delta bid for UK supermarket Sainsbury’s.
Walker said UK trade union the TUC had complained in its submission in the consultation that not enough companies observed regulations to consult with employees. “It is a matter for government to observe what is on the statute,” Walker said.
However, he said during the “brouhaha” of the last year any looseness in communication with employees during the takeover process by a buyout firm had ended because they had reacted to the press attention. “No one wants camels outside their church or on their lawn,” he said, in reference to a union-led protest against Damon Buffini, Permira’s chairman.
UK Treasury Select Committee chairman John McFall was singled out as a “totally inconsistent” critic of the report by Walker. According to the UK newspaper Guardian McFall said private equity firms should disclose the same as public companies; however he also said he was not calling for more regulation or primary legislation.
McFall instead suggested a “tightening up” of the voluntary aspect of the code, saying that the signing up to guidelines should be compulsory for all members of the BVCA.
Walker said he knew McFall wanted disclosure of executive pay in private equity. This was a measure Walker said he would never propose because this was a matter for the firms' investors.
Patrick Dunne, communications director at 3i, said: “I think it’s very well balanced but it is also quite a big ask for the industry.” 3i is listed on the FTSE 100 and its largest deals are mid-market buyouts so its extra reporting burden is limited, he said.
“For private equity as a whole the report means there is not a level playing field with other private competitors. Yet the industry has recognised the need to be more transparent and the prize for doing so is there will be better recognition of the benefits the industry brings,” Dunne said.