Walker criteria encompass 32 portfolio companies

Exclusive research by PEO has shown an estimated 32 portfolio companies fall under the Walker transparency guidelines, despite Sir David Walker’s initial expectation that 65 companies would have to comply.

Click here for list of expected Walker companies

The much-vaunted transparency initiative drawn-up by the ex-Morgan Stanley chairman has criteria limiting the reach of its voluntary guidelines to companies with 50 percent of their revenues in the UK and 1000 UK employees. Companies bought in non-public to private bids with an enterprise value of more than £500 million (€660 million; $992.9 million) will be expected to comply; while companies bought in take-private bids should have a market capitalisation of £300 million.

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.

Click here for list of estimated numbers by firm

Just 16 of those firms are actually expecting to report their portfolio companies results under the initiative. These represent less than 10 percent of the committed firms' UK portfolios and approximately 2 percent of their global portfolios.

The remaining nine firms are intending to provide Walker compliant overviews of their activity on their websites.

Simon Walker: self-regulation can work

Simon Walker, chief executive of the BVCA, said: “We must remember that we are implementing a new form of self-regulation here, one that has never been used before in private equity, anywhere in the world. Also the market is not static and deals continue to be done. As such it is a continually evolving situation.” He said the response from the industry to the initiative had been good and he was confident that this year the UK will demonstrate that self-regulation for private equity can work.

There are moves afoot to take the reforms further. European firm Terra Firma is going to make all its portfolio companies Walker compliant despite only three of its nine companies falling under the criteria.

Terra Firma’s spokesman said: “There is a demand for information and people are interested in that information so why not provide it to them? Frankly you can get this information anyway, [through Companies House in the UK] so rather than making it difficult for people why not make it easy?”

Other firms such as Cinven and Apax Partners are believed to be considering expanding the reforms across their European portfolios. Permira is mulling stretching the reforms across its UK portfolio, while some of its European companies such as Cognis and ProSiebenSat.1 are already reporting substantially, according to a source close to the company.

Some of the UK mid-market is also responding beyond the call of duty to the changes. Duke Street Capital, which owns no companies which fall under the Walker guidelines, has said it will make the majority of its companies Walker compliant, excluding those which are close to exit. The firm has 15 portfolio companies in total.

Buchan Scott, a partner at Duke Street Capital, said: “[Walker] is definitely not just good PR. We feel a lot of the problems last year were the industry’s own fault due to lack of disclosure and a failure to communicate anything.”

Fellow mid-market firms Doughty Hanson, Montagu Private Equity, AAC Capital Partners, Close Brothers Private Equity and Bridgepoint are set to comply with the “spirit of the guidelines” despite having no portfolio companies falling under the umbrella. This compliance will include a detailed report on the firms’ website.

Similarly international buyout firms CCMP, Clayton Dubilier & Rice and Warburg Pincus have signed up to comply despite having no companies that fit the criteria.

The table of compliance has been confirmed by some firms themselves, it has also been compiled from estimates using sources in the market and company websites. The Carlyle Group and TPG Capital’s information on Walker compliance was not available.