UK - Walker review calls for annual reporting

Sir David Walker delivered his initial report today on disclosure and transparency in private equity and recommended all portfolio companies over a certain size report to an enhanced standard. Those companies valued in excess of £500m, acquired for an equity consideration of more than £300m, employing more than 1,000 staff, or formerly a FTSE 250-listed company, should fall into this greater discolsure bracket, Sir David suggests. Contrary to reports in the Financial Times today, compelling non-executives to join the board of portfolio companies was ruled out by the review, although outside board members should be considered in some cases. Under the enhanced disclosure requirement, companies would file an annual report and financial statement on a company website within 4 months of the year-end rather than the current 9 months required under companies legislation. Publishing an interim statement not more than 2 months after the mid-year has also been recommended. This annual report should include a broad indication of fund performance and an attribution analysis indicating how value has been created. During the press conference, Sir David was particularly keen to make his view on non-executive director appointments clear, calling the idea "dotty." He admitted that there was no "silver bullet" and that the 'comply or explain' nature of the recommendations could allow firms to dodge the issue. However, he said he 'expected' private equity firms to comply and hinted that should they choose not to, some form of monitoring mechanism might have to be introduced.