The British Private Equity and Venture Capital Association (BVCA) has established a monitoring committee to check firms are complying with Sir David Walker’s report into transparency and disclosure in private equity.
The BVCA has appointed Sir Mike Rake, the chairman of UK telecoms group BT, to chair the monitoring group, which will ensure firms “comply or explain”, the BVCA said.
The body will have five members, including two people from within private equity, two from outside the industry as well as an independent chair, ensuring the body is occupied by a majority of independents, it said.
Details on the compliance regime and what sanction the committee will if any wield when firms refuse to comply or explain are yet to emerge.
Walker’s final report is published tomorrow following a consultation period after the original document’s publication in July.
Walker suggested disclosure requirements for large portfolio companies – defined as companies formerly in the FTSE 250, an index of the UK’s biggest listed companies; companies with more than 1000 employees and a value of more than £500 million (€700 million; $1.03 billion); or companies where the deal price involves an equity consideration of more than £300 million.
The recently appointed chief executive of the Simon Walker said in an article in UK newspaper Financial Times: “[The Walker proposals] are tough, but we accept that the influence private equity has acquired in the UK economy brings responsibilities.” The BVCA head stressed the Walker report was an unprecedented step which will mean UK companies will be alone worldwide in facing higher levels of public disclosure.
Walker said because of this his body would need to keep the new regime under review, for it would be “madness” if the system serves merely to drive firms overseas to jurisdictions with lower standards of transparency.
Many sources in the industry have been reticent about publicly attacking the proposals as they are seen as a necessary consequence of the industry’s visibility in the wider economy, albeit with reservations about the exact content of the proposals. UK mid-market firm PPM Capital’s Neil MacDougall last week broke ranks with the widely voiced line that private equity should accept the Walker report’s proposals.
He said: “Provided you comply with the rules of the land and act in a legal way you should not have to explain yourself.” He also raised concerns the proposals would possibly leave UK businesses uncompetitive with worldwide rivals.
The BVCA will also comply with a recommendation in the Walker report to provide further data on the performance and impact of private equity and venture capital, including an enhanced economic impact survey and an attribution analysis of the largest buyout houses’ returns.