Compliance & Regulation

Sir David Walker: Countdown to 2008

As the furore surrounding private equity in the UK grew, the BVCA took pre-emptive action and commissioned an independent report on disclosure and transparency. Sir David Walker hopes his recommendations will be widely adopted in 2008.

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Sir David Walker

“The guidelines now in place in the UK for large private equity firms and portfolio companies will increase transparency where, until recently, substantial business activity has been cloaked in secrecy. 

Argument continues as to whether the guidelines go far enough or too far.  But they are both substantial and unique in the world of private equity buyout activity and the structure now being put in place provides for review and modification if this seems called for in the light of experience. 

My hope is that the guidelines and the framework of self-regulatory commitment that underpins them will come to be seen as a pragmatic and workable model that has relevance for others as with the original Takeover Code and, later, the evolution of the 'London approach' in banking situations.” Sir David Walker, led the Walker Working Group, which produced guidelines this November on transparency and disclosure in UK buyouyts.

2007 was a mixed year for Sir David Walker, whose final guidelines caused controversy for being too lenient according to critics of private equity and too burdensome for some of the firms affected.

Walker defended his report before the UK Treasury Select Committee. He said firms will “all commit to it” or attract “the wrath” of the committee and of parliament.

The Committee chairman John McFall, who has been an outspoken critic of the Walker report, criticised it again for several aspects including its “silence on taxation”; its “vagueness on communication with employees”; its “watered down” attribution analysis, while saying “it is uncertain” on how compliance will be enforced.

Walker said attribution analysis was important. He said if the proposals were introduced on an individual basis immediately this would produce a “perverse incentive” as firms may decide to “cook the books and fiddle the figures”.

Once a template had been established accountant Sir Mike Rake’s committee set up to vet compliance with the proposals could choose to extend attribution analysis on an individual basis within a year, he said. But until the template is established “we won’t know the economic impact of private equity”.

Walker said hostility to the industry is generated by an “inadequacy of understanding of the way private equity works” and correct data would probably serve to mellow reactions to private equity.

The main sanction suggested by the Walker report is exclusion from membership of the BVCA.