Making Walker matter

Just 32 companies will produce Walker-compliant reports. Is this enough, asks Nicholas Lockley.

So after all the sound and fury surrounding the Walker report, the number of private equity portfolio companies that are actually affected has turned out to be even smaller than expected.

Sir David Walker, at the time his report on transparency and disclosure was published, had suggested it might be as many as 65, a number he freely admitted was a best guess. In fact, research by PEO has shown an estimated 32 portfolio companies fall under the Walker transparency guidelines.

A total of 25 buyout firms out of the BVCA’s membership of 400 have signed up to the charter for disclosure because their portfolios are likely to contain companies that meet the Walker criteria for more open reporting.

But only 16 of those firms are actually expecting to report their portfolio companies’ results under the initiative. The remaining nine firms, which currently don’t own any businesses that meet Walker’s criteria, are committed to providing overviews of their activity on their websites.

Clearly this may change. PEO can reveal there are a number of buyout firms including Terra Firma, Cinven and Apax, which are already considering extending the Walker compliance across their European portfolios, irrespective of whether the companies qualify. In addition, a number of mid-market firms such as Duke Street Capital and Montagu Private Equity throwing in their lot with the mega funds and volunteering compliance. Both groups are to be applauded.

However, given the PEO findings, there is a danger of the Walker Report being perceived as not inclusive enough to effect a meaningful change in the buyout business. It could too easily be seen as a light touch of self-regulation and far from enough to guarantee the industry respite from political and regulatory scrutiny.

Needless to say that such an outcome would be counterproductive. To avoid it, more private equity professionals should think about embracing Walker beyond its limited reach to ensure the industry is properly covered when the next squall breaks.