Further to our e-bulletin article of December 2007 on the publication of the Walker Guidelines on disclosure and transparency in private equity (the Guidelines), the Guidelines Monitoring Group (GMG) has published its first report.

The GMG, chaired by Sir Michael Rake, chairman of BT Group plc, was established to review compliance with, and to make recommendations for any necessary changes to, the Guidelines. This first report by the GMG summarises the findings of two reviews.

The first review was of the standard of disclosures made by private equity firms and certain of their portfolio companies. This review found that half of the private equity firms met all of the Guidelines' disclosure requirements. Those firms who were not in full compliance have since agreed to make the further disclosures suggested by the GMG. The first review also assessed the standard of disclosures made by certain portfolio companies. Overall, the GMG considered that only a small number of portfolio companies had not met the Guidelines' disclosure requirements to a satisfactory degree. The GMG has communicated with the private equity firms that own the portfolio companies in question and has received commitments to address the disclosure shortcomings in each case.

The second review was of the compliance by the private equity industry with the other recommendations of the Guidelines, including the application of standardised valuation guidelines and reporting to limited partners, the provision of information to the British Private Equity and Venture Capital Association (BVCA) and the requirement to ensure timely and effective communication with portfolio company employees, particularly at times of strategic change. The GMG did not identify any exceptions to full compliance with these recommendations.

The GMG found that there had been a high level of support for, and commitment to, the Guidelines and that the efforts made to date by the private equity industry were encouraging. However, the GMG recognised that, as this was the first year in which the Guidelines had applied, the nature of disclosures made varied significantly and that best practice would evolve over time. The report notes that improvement in some areas is both possible and necessary.

View the GMG report (36 page pdf) (which lists the portfolio companies and private equity firms that have agreed to comply with the Guidelines).

The BVCA and Ernst & Young have also published a first annual joint report on the performance of portfolio companies to which the Guidelines apply. This joint report was produced as part of the implementation of the Guidelines by the private equity industry.

View the joint report (24 page pdf).