Walker Guidelines Monitoring Group publishes 2013 annual report

9 December 2013

The Guidelines Monitoring Group (“the Group”), the body established to review the private equity industry’s conformity with the Walker Guidelines, has published its sixth report on disclosure and transparency in private equity. During the year, Nick Land was appointed as the Chairman of the Group and Glyn Parry as an independent member. Sir Michael Rake stepped down as Chairman and Alan Thomson as an independent member, both having served in their roles since the inception of the Group.

As in previous years the Group reviewed a sample of portfolio companies to assess compliance with the enhanced disclosure requirements set out in the Guidelines. Compliance levels improved in 2013 and of the sample of 30 portfolio companies reviewed by the Group, 29 met the enhanced disclosure requirements. This is an encouraging progression compared to prior years, particularly in the context of higher standards seen in the FTSE 350 – the benchmark against which compliance is measured.

The number of portfolio companies covered by the Guidelines increased by 9 to 89 in 2013, and the number of private equity firms covered – which is determined based on ownership of portfolio companies within scope – increased by 6 to 53. The Guidelines extend to firms that conduct their business in a manner that would be perceived by external stakeholders to be similar to that of other participants in the private equity industry and the new entrants were all ‘private equity-like’ firms.

The quality of narrative disclosures for portfolio companies covered by the Guidelines for the first time this year was considerably higher than the same group in last year’s review. Those previously covered by the Guidelines continued to demonstrate a basic or good level of compliance with the requirements, although the quality of disclosures varied across requirements.

For the first time the Group reviewed the websites and/or annual reports of all private equity firms covered by the Guidelines to assess if they met the disclosure requirements relating to the publication of information including details on their investment approach, UK portfolio companies, and leadership of the firm. All members of the BVCA covered by the Guidelines met the requirements or were in the process of updating them at the time of the publication of this report.

Since the financial crisis there has been a heightened emphasis on the clarity and quality of financial reporting. Whilst the portfolio companies reviewed were generally meeting the level of disclosure observed in the FTSE 350, the standard of disclosure expected by stakeholders is increasing, particularly the need for a clear linkage between the different elements of the annual report which should be underpinned by strategic priorities.

The Group continues to review the Guidelines to ensure they evolve over time with developments in financial reporting and the industry. This includes reviewing the enterprise value thresholds and whether a portfolio company should explicitly confirm that they have complied with the Guidelines. Following a consultation period, the Group will make changes to the Guidelines to incorporate the new Department of Business, Innovation and Skills’ narrative reporting requirements and the related guidelines issued by the Financial Reporting Council, including the publication of a strategic report.

Nick Land, the Chairman of the Guidelines Monitoring Group, said:

“I was pleased to see overall compliance levels improve this year, particularly against the backdrop of higher standards observed in the FTSE 350, our chosen benchmark, and the growth in ownership by firms that are not traditional private equity players. Early engagement by portfolio companies and their owners was instrumental to achieving this result, especially by new entrants. The next year will be a busy one for the Group as it, alongside the BVCA, consults on amendments to the Guidelines arising from new narrative reporting requirements in the UK. I look forward to working with the private equity industry in the coming years.”

To read the report, please click here.

Notes to Editors

  1. The Walker Guidelines
    In February 2007 the BVCA 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 resulted in the publication of the Guidelines in November 2007.
  2. Guidelines Monitoring Group
    The Group is chaired by Nick Land, a non-executive director on a number of boards including the Financial Reporting Council and Vodafone Group. He is supported by two other independent members; Glyn Parry, Director of Group Financial Control at BT Group plc, and Baroness Drake, former president of the TUC. Representing the private equity industry are Robert Easton, Managing Director at The Carlyle Group, and Gerry Murphy, Senior Managing Director at The Blackstone Group.
  3. Definition of private equity firms and portfolio companies covered by the Guidelines
    Further information on the Guidelines Monitoring Group and the Walker Guidelines can be found at www.walker-gmg.co.uk
  4. Contact details
    Please contact Gurpreet Manku for further information.