Tag: Walker Guidelines

The Guidelines Monitoring Group has published its First Report (.pdf) on the UK private equity industry’s conformity with the Walker Guidelines.

The Guidelines are intended to have funds enhance their reporting and the reporting by their large portfolio companies. They define a portfolio company as one with a market capitalization (prior to be acquired) was in excess of £300 million, more than 50% of the revenues were generated in the UK and the UK employees totaled in excess of 1,000 full-time equivalents.

The Guidelines propose that the portfolio companies should annually disclose:

• the identity of the private equity fund (or funds) that own the company
• the composition of the portfolio company’s board
• a financial review of its risk management and uncertainties facing the company
• a business review in compliance with Section 417 of the Companies Act.

The Guidelines propose that a private equity firm should publish a description of its investment approach, investment holding periods, leadership of the firm, arrangements for dealing with conflicts of interest, and categorization of its limited partners/investors.

Thirty two firms made reports. (see Appendix 1 of the Report) and 54 portfolio companies (See Appendix 2 of the Report).

In February 2007 the British Private Equity and Venture Capital Association asked Sir David Walker to undertake an independent review of the adequacy of disclosure and transparency in private equity with a view to recommending a set of guidelines for conformity by the industry on a voluntary basis. This review culminated in November 2007 with the publication of the Guidelines for Disclosure and Transparency in Private Equity (.pdf).

The Guidelines require additional disclosure and communication by private equity firms and their portfolio companies where such portfolio companies had more than 1,000 UK employees, generate more than 50% of their revenues in the UK and either had an enterprise value of more than £500 million when acquired by one or more private equity firms or, in the case of a public to private transaction, had a market capitalisation together with premium for acquisition of control of more than £300 million.

• The principal recommendations of the Guidelines for enhanced disclosure by portfolio companies are that:
• The audited report and accounts should be readily accessible on the company website no more than six months after the company year end.
• The report should identify the private equity fund or funds that own the company and provide details of the composition of the board.
• The financial review should cover risk management objectives and policies in the light of the principal financial risks and uncertainties facing the company with links to the appropriate detail in the footnotes to the accounts.
• The report should include a business review that substantially conforms to the provisions of Section 417 of the Companies Act 2006 including the Enhanced Business Review requirements that are ordinarily applicable only to quoted companies.