The UK private equity industry has today (17 July) published a series of measures that could drive greater openness in the sector and stave off public and political criticism in the country.
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A report, commissioned by the British Private Equity and Venture Capital Association (BVCA), has made a number of recommendations to improve corporate governance in the sector and promote greater transparency.
The report suggests that private equity firms could publish financial reports each year and detail their sources of funding.
The study, headed by former Morgan Stanley executive Sir David Walker, comes after months of fierce criticism has been leveled at the private equity sector.
Private equity firms, which own a number of UK food companies including biscuit maker Burton’s Foods, have been accused of asset-stripping and under-investing in the firms they buy.
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By GlobalData“Private equity needs to become more open,” said Sir David. “The importance of private equity has been recognised and supported by successive governments in the UK. But it has been inadequately explained, and its role and the ingredients in its success are not well understood.”
Sir David added: “This is partly the result of the understandable tendency of many in the industry, who choose not be in the public eye of the listed sector, to say that ‘private means private’ and to be attentive to confidentiality to the point of secretiveness.”
Under the proposals, Sir David suggested that certain private equity firms – those that employ over 1,000 staff and are worth more than GBP500m (US$1bn) – should give more information about their businesses.
The guidelines could form the basis of a voluntary code of conduct in the sector and the BCVA gave the proposals a cautious welcome.
BVCA chairman Wol Kolade said: “We agree that there needs to be more transparency, but there must also be a level playing field between private equity and other private companies. We will also want to make sure that the overall competitive position of the UK as a place to do business is not undermined.”
UK unions said the Walker report needed to address the issue of workers’ rights. Jack Dromey, T&G section of Unite deputy general secretary, said the report was “quiet on workers rights to the point of Trappism”.
“The consultation by Sir David Walker should not mean private equity prepares vats of whitewash to cover up the way workers in the UK are treated in these leveraged buy-outs,” Dromey said. “Private equiteers should not be able to exploit the loophole in share transfers, operate in secret and keep workers in the dark.
