An increased proportion of private equity-owned companies adopting the Walker Guidelines’ for the first time failed to meet the required standard.
In an updated version of the guidelines, which now feature examples of best-practice reporting, Sir Michael Rake, chairman of the Guidelines Monitoring Group (GMG), who is responsible for monitoring conformity with the guidelines, described the failure of these firms as “disappointing”.
Fifteen portfolio companies were reviewed for the first time and 11 met the required threshold – a smaller proportion than in previous years. GMG will be writing individually to companies to explain specifically where they went wrong and what they can do to improve their reporting.
Last year PE Manager wrote that some firms were struggling to meet the guidelines after thresholds were lowered to bring more firms within their scope. For example companies acquired for £350 million ($530 million; €405 million), down from £500 million, became subject to the guidelines.
Casting a wider net resulted in lesser quality disclosure reports, said one source familiar with the matter at the time. He added it was “obvious the level of disclosure is not as good as some of those who have been doing it for four years”.
Despite the setback the updated guidelines said that the overall standard of reporting was improving. The guidelines use the reporting standard of FTSE 350 companies (the largest 350 companies listed on the London Stock Exchange) as a benchmark for private equity firms and the GMG notes a move towards that standard.
“Overall the quality of reporting reached a similar standard of the FTSE 350 but, as ever, the Group would urge all qualifying companies to aim for best practice even where this exceeds the FTSE 350.”
The updated guidelines can be found here.