This is the eighth annual report of the Private equity reporting Group (the “Group”) and provides a summary of the private equity industry’s conformity with the Guidelines for Disclosure and transparency in Private equity (the “Guidelines”) following their introduction in November 2007. The Group was established in March 2008 to monitor conformity with the Guidelines recommended by Sir David Walker in 2007 and make periodic recommendations to the British Private Equity and Venture Capital Association (the “BVCA”) for changes to the Guidelines if required.

In 2015 the Group was renamed as the Private Equity Reporting Group, having previously been known as the Walker Guidelines Monitoring Group. This change better reflects its activities which the Group will continue to convey to the industry’s stakeholders. These stakeholders include government, regulators, media, employees, customers and the public more widely.

Key findings

• This is the first year in which many portfolio companies complied with new reporting obligations under the Guidelines, the first substantial change to the content of the Guidelines since they were introduced. The Guidelines were amended in 2014 to incorporate changes to narrative reporting in the UK which now requires a strategic report for companies preparing financial statements under the Companies Act 2006. This led to several new requirements being added to the Guidelines including disclosure on the portfolio company’s business model, detail on gender diversity and its response to human rights issues. The revised Guidelines applied to companies with years ending on or after 30 September 2014 and compliance with these is therefore being reviewed for the first time in this report.
• Overall, 95% of the sample reviewed in 2015 achieved a good or excellent/“best in class” level of compliance, whereas the entire sample achieved this level in 2014. This fall is perhaps unsurprising due to a combination of: a) the Guidelines including new requirements in the current year which can take time to implement and b) improvements in the quality of reporting by listed companies in the FTSE 350, being the benchmark for judging compliance. Of the portfolio companies reviewed, one company, Viridian (backed by Arcapita), has not complied with the Guidelines in full this year.
• The number of portfolio companies required to comply with the Guidelines decreased by ten to 66, which was a result of 17 exits and seven new deals.
• The number of private equity firms managing or advising funds which owned the portfolio companies within scope increased by six to 65.
• The Group is committed to working with private equity firms, firms that conduct their operations in a ‘private equity-like’ manner and portfolio companies to improve their disclosures. We strongly encourage portfolio companies to aspire to standards of disclosure above the minimum requirements within the Guidelines, being those observed in the FTSE 350. Detailed feedback will be provided to all parties involved to help achieve this objective. This is particularly pertinent given the revisions made to the Guidelines and fall in the number of companies providing disclosures to at least a good level.
• Disappointingly, only 19 of the portfolio companies reviewed made the audited report and accounts or an alternative report available on the company’s website. The Group continues to reinforce the message that accounts should be readily accessible on the company’s website. In addition only eight portfolio companies included a statement of compliance with the Guidelines in their annual report. This was also a new requirement for the Guidelines this year.
• Portfolio companies improved the level of disclosure covering: key performance indicators (both financial and non-financial); trends and factors affecting the future of the company; environmental matters; and social and community issues.
• However, the quality of disclosure for the following criteria was weaker this year against a backdrop of increasing standards seen in the FTSE 350 and amendments to the Guidelines: identity of the private equity firm; details of board composition; business model; and gender diversity.
• The Guidelines operate on a ‘comply or explain’ basis and none of the portfolio companies reviewed adopted an ‘explain’ approach within their annual report.
• The Group reviewed the websites and/or annual reports of all private equity firms covered by the Guidelines to assess compliance with applicable disclosure obligations relating to their own activities. Members of the BVCA met the requirements or were in the process of updating them at the time of the publication of this report.