UK trade body the Association of Investment Companies has responded to Sir David Walker’s consultation document on transparency for UK private equity arguing the reporting guidelines should be extended.
The association’s spokesman said: “If the proposals solely target private equity they will single out one group of companies for a reason not germane to the debate.” Walker has also said he believes the reporting guidelines would be acceptable for all large private companies. The trade body has called for Walker to consult these companies more widely.
High profile public to private bids have increased the focus on private equity’s reporting in the UK, but it is inappropriate to distinguish the different ownership structure from that of other private companies, the spokesman said.
Earlier this year US buyout firm Kohlberg Kravis Roberts became the first private equity firm to take private a FTSE 100 company, acquiring chemist Alliance Boots for £11.1 billion (€15.9 billion; $22.6 billion).
Walker’s report suggested new disclosure requirements for large portfolio companies – defined as companies formerly in the FTSE 250, an index of the UK’s biggest listed companies; companies with more than 1000 employees and a value of more than £500 million; or companies where the deal price involves an equity consideration of more than £300 million.
Walker wants these large companies to publish an annual report within four months of their financial year-end, which outlines the composition of their entire board, details the level and structure of their debt, and talks about the company’s values and “role in the wider community”.
The association has also criticised the Walker’s suggestion that private equity portfolio companies report every six months through an interim statement. The spokesman said not doing so would encourage more considered reporting on a yearly basis.
It also wants an explicit addition to the report that no disclosure need be made should it compromise the commercial interests of a company and its shareholders.
The spokesman said: “You wouldn’t expect disclosures to be made about commercial sensitivities at a public company. This is a comply or explain code and we’re talking about the ability of managers to perform. People should be seriously considering how they communicate with employees and other stakeholders, but it is sensible to withhold disclosures where there are commercial sensitivities.”