A private equity firm should publish either in the form of an annual review or through regular updating of its website:

• A description of the way the FCA-authorised entity fits into the firm as a whole with an indication of its investment approach including investment holding periods along with an indication of the leadership of the firm and confirmation that it has appropriate arrangements to deal with conflicts of interest; and
• A commitment to conform to the Guidelines, a description of the companies in the private equity firm’s portfolio and a categorisation of the limited partners in the fund or funds including a geographic categorisation and a breakdown by type of investor.

Additionally, private equity firms should, in their reporting to limited partners, follow established guidelines, such as those published by Invest Europe, follow established guidelines in the valuation of their assets, and should provide data to the BVCA in support of its enhanced role in data collection, processing and analysis.

Private equity firms should ensure that their portfolio companies comply with (or explain departures from) the required disclosure and provide data on their portfolio companies for annual reporting on performance.

Private equity firms should also commit to ensure timely and effective communication with employees, either directly or through their portfolio company, as soon as confidentiality constraints are no longer applicable.

A private equity firm is also required to sign the statement of conformity annually.

Private equity firms for the purposes of the Guidelines include private equity and ‘private equity-like’ firms (together “PE firms”). PE firms include those that manage or advise funds that either own or control one or more companies operating in the UK and the company or companies are covered by the enhanced reporting guidelines for companies. PE firms include those that acquire portfolio companies:

• i) with funds provided by one or more investors;
• ii) an exit/disposal of the company is envisaged and
• iii) may play an active management role in the company.

This would therefore include, but is not limited to, other types of investment funds including infrastructure funds, pension funds, sovereign wealth funds and credit/debt funds. It also applies to firms that may be headquartered outside of the UK. Banks and credit institutions, other than their asset management operations, are specifically excluded.

In summary, a portfolio company should publish its annual report and accounts on its website within six months of the year-end and:

• A portfolio company should prepare a narrative report with enhanced disclosures which meet the requirements of Section 414C of the Companies Act 2006 including subsections 7 and 8 (which are ordinarily applicable only to quoted companies). The report should inform stakeholders and help them assess how the directors have met their section 172 duty to promote the success of the company.
• For a UK portfolio company, these enhanced disclosures are required to be included in the strategic report under the Companies Act 2006. A non-UK portfolio company may include these disclosures in a directors’ report or equivalent in line with applicable legal requirements in the non-UK country.
• When considering the level of detail and nature of information to be included in the narrative report, the portfolio company should have regard to the guidance set out in the Financial Reporting Council’s Guidance on the Strategic Report.
• For the avoidance of doubt, the narrative report should specifically include:
  • a description of the company’s strategy and business model;
  • the main trends and factors likely to affect the future development, performance and position of the company’s business;
  • analysis using financial key performance indicators, and where appropriate, analysis using other key performance indicators;
  • risk disclosures as outlined in Part V of the Guidelines (Section 3.5); and
  • information about company stakeholders as outlined in Part V of the Guidelines (Sections 3.6-3.9).
  • A portfolio company should also publish a half year review and upload this on its website within three months of the interim date.

For the purposes of the Guidelines, a portfolio company is a UK company:

• Where the majority of equity or control is acquired by one or more private equity firms in a transaction where enterprise value at the time of transaction exceeds £500 million and either:
  • The company generates more than £200 million revenues of which 50% are generated in the UK; or
  • The company employs more than 1,000 full-time equivalents in the UK.
• Private equity firms are defined in Part V of the Guidelines (Section 2.3).
• For a public to private transaction the enterprise value should be calculated as the market capitalisation together with the premium for acquisition of control including net debt.
• Infrastructure companies which are treated in a private equity-like manner by their owners and meet the criteria above, shall be included in the scope of the Guidelines. The assessment criteria for whether a company is treated in a private equity-like manner are included in Appendix B of the Guidelines.
• If a company meets the above criteria, it will remain in scope until such time as it no longer meets the ongoing inclusion of a portfolio company as outlined in Part V of the Guidelines (Section 2.2).

The above definition of a portfolio company reflects the changes made to the criteria in December 2024 and is effective for accounting year ends of 31 December 2024 and onwards.

A portfolio company of a PE firm becomes a Walker company, subject to meeting the other criteria as laid out in the Guidelines, when any one of the following criteria is met:

• It is evident the private equity firm holds a majority stake (>50% of the ordinary shares) in the underlying business; or
• If a private equity firm, in its own financial statements, discloses that it maintains control of the portfolio company; or
• A private equity firm has the ability to direct the financial and operating policies of a portfolio company with a view to gaining economic benefits from its activities. Consideration shall include, but not be limited to: management control; board seats; directors indicative of significant influence.

The Group will independently review acquisitions of portfolio companies to assess if they are part of the Walker population and answer any questions firms have regarding scope.

Yes. Companies who have met the criteria outlined in question 4 will remain in scope until such time as:

• The majority of equity or control is sold or transferred to a non-private equity entity or taken public, or
• The company has shrunk in size such that for the last two financial year end dates, they no longer meet both of:
  • Generating more than £200 million revenues of which 50% are generated in the UK; and
  • Employing more than 1,000 full-time equivalents in the UK.

• Portfolio companies will not be permitted to “grow out” of scope of the Guidelines. For example, if a company originally met the revenue test (both £200m with over 50% UK) and did not meet the employee test, but, due to international expansion, the proportion of UK activity has decreased (to less than 50% UK revenue) relative to international activity (as a result of international growth).

Where more than one PE firm is involved in a transaction and they collectively own a controlling stake in a portfolio company, those firms will be jointly and severally responsible for ensuring that the portfolio company applies the Guidelines, and each of those firms will be assessed for compliance with the requirements that apply to them. Subject to prior approval by the Private Equity Reporting Group, this does not apply to minority shareholders which invest alongside other majority shareholder(s) and where both the majority shareholder(s) and the portfolio company comply with the Guidelines. The Private Equity Reporting Group’s approval will depend on the specific facts and circumstances and the extent to which control is exercised.

A portfolio company of a private equity firm is eligible for removal from the mandatory Walker population when any one of the following criteria is met:

• The portfolio company is sold via a trade sale; or
• A private equity firm exits via an Initial Public Offering, even if the private equity firm retains a majority stake. The newly listed vehicle will be bound by the reporting requirements mandatory for listed companies; or
• An event occurs, such as a restructuring, whereby a private equity firm is no longer able to control the financial and operating policies of a portfolio company.

To ensure that the Guidelines consider instances where there has been a dilution of ownership post initial acquisition, a private equity firm that holds 20 percent or more of the voting rights following such dilution will be presumed to exercise significant influence over that portfolio company, and will continue to be a Walker company, unless the contrary is shown. This test will not be applied at initial acquisition by a private equity firm, and will only be applied where there is a dilution of ownership post initial acquisition.

See also question 6.

See question 6.

Yes. The Guidelines promote disclosure and transparency throughout the industry in the UK and this therefore extends to firms that are not BVCA members or based outside of the UK. Further, the Guidelines and examples of good practice will assist firms when implementing the Alternative Investment Fund Managers Directive as there are additional disclosure requirements for certain portfolio companies.

The Group and the BVCA are continuing to hold discussions with other potential private equity or “private equity-like” firms, including sovereign wealth funds, with the purpose of enlisting their voluntary conformity with the Guidelines. As explained in question 10), we are committed to promoting transparency across the industry and as business and ownership models evolve, we must capture all relevant firms.

The Group’s annual report will review compliance by portfolio companies that were within the Walker population in the preceding calendar year. For example, the report published in December 2013 covered portfolio companies that were in the Walker population between 1 January 2012 and 31 December 2012. Therefore, if you were acquired in October 2012 and your year end was December 2012, you needed to produce financial statements that comply (or explain) with the Guidelines.

The Group and PwC publish a good practice guide each year. The guide provides clear and in-depth information for companies required to conform to the Guidelines and provides a number of real-life examples to illustrate what is required. The guides are available at here.

The BVCA also produces a guide to Responsible Investment. The publication seeks to improve firms’ understanding of environmental, social and governance (ESG) risks and opportunities, showing how these can be managed within a structured investment framework. An effective responsible investment approach requires a focus on ESG issues throughout all phases of every investment, from pre-investment diligence, through active ownership, up to the time of exit. This guide takes the guidance offered to a more detailed and practical level, throughout the life cycle of private equity and venture capital investments. The guide is available here.

The Guidelines are implemented on a “comply or explain” basis. Companies therefore have the option to “explain” why certain disclosures have not been included. There have been few instances of companies opting to explain in recent reviews and the Group may not accept the explanation provided.

When a portfolio company and its owner(s) choose not to comply with Guidelines, they are named as non-compliant in the annual report published by the Group. With respect to concerns about the publication of sensitive information, the guides discussed in question 13) provide examples of the detail companies present in their financial statements. Further, the Guidelines incorporate section 414C of the Companies Act 2006 which includes the following:

Nothing in this section requires the disclosure of information about impending developments or matters in the course of negotiation if the disclosure would, in the opinion of the directors, be seriously prejudicial to the interests of the company.

The disclosures should be included in the accounts that present the trading results of the business and its capital structure, notably any debt with third parties. This can be a group company which is not itself a UK limited company or equivalent and companies within the current Walker population produce and publish consolidated accounts for group companies outside of the UK. The disclosures do not need to be replicated in subsidiary financial statements.

Yes. The accounts should be available on a company’s website or linked to another site which does include corporate information.

Portfolio companies should apply both sets of requirements. Often the requirements of the Guidelines are already covered by industry requirements e.g. those required by Ofwat for water companies.

Each year, the industry is required as part of the Guidelines to publish a report that aggregates the performance of the portfolio companies that meet the criteria. This investigates trends at a summary level, in employment, investing, trading and drivers of returns. A data template is provided each year to the private equity firm or the portfolio company directly to enable this reporting.

The BVCA supports the work of the Group. The Guidelines also recommended that the BVCA should:

• Enlarge and strengthen its data gathering, analytical and reporting capabilities and should apply those capabilities to increased research activities covering performance and attribution analysis for portfolio companies, including aggregated returns data on exits;
• Initiate discussions with “private equity-like” groups with the purpose of enlisting their voluntary undertaking to conform to the Guidelines; and
• Participate proactively with overseas private equity trade associations to develop a methodology for the content and presentation of fund performance information.

Each year, the BVCA commissions EY to undertake research on the performance of portfolio companies and the annual reports can be found here. The BVCA continues to encourage private equity-like groups to comply with the Guidelines and liaise with trade associations across Europe on research activities.