Private Equity Firms Set For Shake Up, Grant Thornton Predicts

by Robert Lee, Tax-News.com, London

08 September 2008

Grant Thornton has this week urged private equity firms in the UK to re-examine the historic actions of their portfolio companies and carefully consider their future actions, as the Pensions Regulator will pursue associated firms that have failed to adequately make provision for their pension responsibilities while receiving benefit from their ownership.

Darren Mason, Partner and Head of Pensions Advisory within Grant Thornton's restructuring practice, commented:

"Private equity houses need to look carefully at their historic actions to ensure they won't face claims for contributions down the line. For many in the private equity industry this warning will come as something of a wake up call. The Pensions Regulator is not only able to look back at acts or failure to act since April 2004 but also examine what returns an investor has received and how an employer has been funded prior to that date," he explained, adding:

"In the post-Maxwell era the pension of the man in the street is sacrosanct and now a legal liability, no longer a mere promise to pay.

"The attractiveness of assets that are tied to pension funds may well have been diminished by the Pension Regulator's increased powers and the exercise thereof. Private equity firms and other organisations that tend to buy and sell businesses on a regular basis need to make sure that proper provision is made for pension liabilities."

Mason states that as the Regulator's powers are also retrospective, private equity houses should now enter a planning phase to minimise the risks associated by this new push by the Pensions Regulator.

"We are seeing an increase in work for trustees and private equity houses, which we expect to continue against this backdrop of increased regulatory scrutiny," he concluded.

Recommended