Private equity firms struggle to comply with Walker rules

Only half of the 32 participating private equity firms are in full compliance with the BVCA-backed Walker Guidelines, the first report shows. The guidelines were established in 2007 by David Walker. Participating private equity firms include The Blackstone Group, 3i and Kohlberg Kravis Roberts.

Just half of the private equity firms which have agreed to adhere to the Walker Guidelines have disclosed the recommended level of company information during 2008.

The guidelines, which were established in 2007 by David Walker, recommend best practice for the disclosure of firms’ annual review, regular provision of investment approach and company information, investment valuation methods, reporting to limited partners and portfolio company information.

Because of the voluntary nature of the guidelines, they have been widely criticised as ineffectual by politicians and policy makers, and were famously branded “as effective as a chocolate fireguard” by Paul Maloney, national officer of the GMB Union.

In the first report of its type, the independent Guidelines Monitoring Group (GMG) found just half of the 32 participating firms have complied with the requirement to publish an annual review and release investment approach and company information into the public domain via company websites.

The group was established last year and is chaired by Sir Michael Rake, chairman of BT.

Only three quarters of the firms provided “a categorization of the limited partners in the funds or funds that invest or have a designated capability to invest in companies that would be UK portfolio companies.”

Although not all the participating firms have been one hundred percent compliant, the group said it was confident that significant progress in disclosure had been made.

“This was the first year in a process where best practice will evolve over time. The efforts made by the private equity industry so far are therefore encouraging, but improvement in some areas is both possible and necessary,” the GMG stated in its report. It only considers that a small number of companies have not met the Guidelines’ enhanced disclosure requirements to a satisfactory degree, despite some of the omissions of information.

The British Venture Capital Association (BVCA) chief executive, Simon Walker said: “The BVCA has always argued that the Walker Guidelines are a process, not an event. We look forward to engaging with the GMG as its members evaluate the compliance promised and consider the evolving character of the Walker Guidelines in the months ahead.”

Firms adhering to the Walker Recommendations include private equity giants The Blackstone Group, 3i and Kohlberg Kravis Roberts.