UPDATE:New private equity code outlines transparency

Source: Exec Digital UK

Date :20/11/2007 09:40:23

Private equity firms such as Blackstone, Permira, and Kohlberg Kravis Roberts will be made to become more transparent under the new code of conduct for the industry.

Commissioned by the British Venture Capital Association (BVCA), the code of conduct follows the yet-to-be published report by Sir David Walker to review private equity transparency, following concerns that companies are not being open enough about their deals.

Equally, pressure has been mounting for greater disclosure by sovereign wealth funds after British and American politicians have said that their lack of transparency could fuel a new round of political protectionism.

Code of conduct

Sir David's proposals for portfolio companies will be limited to those taken private with a value of more than £300 million (rising to £500 million for secondary buyouts) and those with more than 50 percent of their revenues generated in the UK, and more than 1,000 UK employees.

Under the code, portfolio companies owned by private equity will be required to disclose the private equity companies that own them and the senior managers and advisors. In addition, they will also have to give details of the company’s accounts in half-year and full-year reports.

The private-equity firms that own them will give details about their corporate governance, describing their structure and investment approach.

Lastly, Sir David recommended that the BVCA - who is expected to implement Sir David’s proposals - engage with private equity firms and encourage them to comply with the guidelines, which are not compulsory.

Comply or explain

Sir David's proposals will be policed by a five-member monitoring and review body led by Sir Michael Rake, the chairman of BT, who will check that private equity firms and portfolio firms are conforming to the "comply or explain" principle and to keep the guidelines under review.

BVCA chief executive Simon Walker said: "The BVCA understands the importance of the private equity industry being more transparent. This is why we have established an independent monitoring group to police the guidelines Sir David Walker will set out."

November 20, 2007