Grant Thornton Comments On Mixed Reaction To Walker Report

BY Jason Gorringe, Tax-News.com, London

09 June 2008

Six months on from the publication of the Walker Report, and the UK private equity industry has offered a mixed verdict on its impact, according to new research by business and financial advisory firm, Grant Thornton.

The survey of 100 senior private equity executives found that the majority of these executives (68%) view the industry as more transparent, although this dropped to half (46%) that felt there was a greater understanding of the PE industry since the report was published.

Only 27% believed that the private equity industry was viewed in a more positive way.

While the Walker Report recommendations were aimed first and foremost at the largest private equity houses and their portfolio companies, there was an expectation that the guidelines set out in the report would create best practice throughout the industry.

Grant Thornton Private Equity Partner, Mat Bhagrath, observed that the Walker Report was a natural reaction at a time when both the media and Government spotlight was firmly on the behaviour of the private equity industry, particularly on the mega-buyout deals of public companies:

"But today the credit crunch has put a dampener on the highly-leveraged buyouts market, resulting in a number of private equity firms reverting to focussing on improving underperforming companies and their profitability."

"When private equity operates in this area the media spotlight is a lot less harsh, and many PE houses are content to go on operating as they have always done, with the emphasis on private," he stated.

While a sizeable proportion of private equity executives have noticed a change in the general perception of the industry, this was somewhat tempered by the fact that 9% of those questioned felt that private equity actually faced a more negative perception in the market place.

"Private equity still has a major challenge in communicating the overall positive and growing contribution the industry makes to the UK economy. Despite the general economic downturn, the industry still has significant funds to invest, which in the right circumstances will have a positive impact on businesses that would otherwise have struggled to raise funds," Bhagrath added.

The survey also found there had been limited change of emphasis on ethical standards, with 27% of firms now offering a formal ethical code, compared with 24% prior to the Walker Report. Two thirds (64%) follow an informal ethical code, down from 66%.

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