Walker Guidelines Monitoring Group publishes 2014 annual report

5 December 2014

The Guidelines Monitoring Group (“the Group”), the body established to review the private equity industry’s conformity with the Walker Guidelines, has published its seventh report on disclosure and transparency in private equity.

Compliance levels continue to improve among the portfolio companies in the sample covered by the report, with all 25 achieving either a good or excellent level of disclosure, with the proportion of the latter increasing to 16% from 9% in the 2013 study. This is a positive development in light of the improvement in disclosure standards on the FTSE 350, the benchmark used by the Group. One area of concern, however, is in regards to the publication and data provision requirements, which some companies failed to meet.

Other highlights include:

  • Portfolio companies markedly improved the level of disclosure covering strategy, the market environment and principal risks and uncertainties. However, disclosures covering environmental matters and social and community issues were weaker.
  • Only 20 of the portfolio companies reviewed made the audited report and accounts available on the company’s website and a further two published a Walker Guidelines-compliant report that was not the full audited accounts. The Group continues to reinforce the message that accounts should be readily accessible on the company’s website and will be monitoring this in more depth next year, including the requirement to publish, within the six month period.
  • The number of portfolio companies required to comply with the Guidelines decreased by one to 71, following a record year of transaction activity since the Guidelines were implemented in 2008. This includes five portfolio companies that exited and re-entered the population following a change in ownership.
  • The number of private equity firms managing or advising funds which owned the portfolio companies within scope increased by two to 55. 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. Following a further review this year, the Group amended the definition of private equity firms covered by the Guidelines to include these firms.

This year also saw the first amendments to the content requirements in the Guidelines, incorporating new narrative reporting requirements and a statement of conformity for portfolio companies. This will make it more difficult to achieve a good or excellent level of compliance next year and eligible companies are urged to take this into consideration in the upcoming reporting season.

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

“I was delighted to see compliance levels improve again this year, with a growing number of companies reviewed providing an excellent level of disclosure on their activities. When considered in the context of our benchmark, the FTSE 350, and desire to monitor compliance against the better performers in this cohort, the results for 2014 are pleasing. Looking to the year ahead, portfolio companies will need to amplify their efforts when complying with the latest edition of the Guidelines. These were revised due to the introduction of the strategic report in narrative reporting in the UK and will raise the bar for compliance.”

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 Ralf Gruss, Chief Operating Officer at Apax Partners, and Gerry Murphy, Senior Managing Director at The Blackstone Group. More information about the group can be found here.
  3. Contact details
    Please contact Gurpreet Manku for further information on 020 7492 0454