The UK's Walker Guidelines for Disclosure and Transparency in Private Equity (the "Guidelines") have been updated, and a feedback statement was published by the BVCA on 18 December 2024.
The revised Guidelines will take effect for financial years that end after April 2025 and will be used for the Private Equity Reporting Group's (PERG) 2026 review.
The first version of the Guidelines was issued in 2007 to increase transparency of the activities of large private equity-backed companies and to demonstrate the private equity industry's contribution to the UK economy.
In particular, the Guidelines aim to ensure that reporting by large UK private equity-backed companies is in line with reporting by similar sized UK listed companies. Certain disclosures are also required from the private equity firms who control in-scope portfolio companies, together with a commitment to contribute data to the BVCA so that annual aggregate reports on performance activity can be produced.
The Guidelines are voluntary, although compliance is required by the BVCA for BVCA member firms.
The original 2007 guidelines were reviewed and updated in 2014 and 2022 to incorporate new reporting requirements and improve public access to the published information. However, the BVCA and PERG, the semi-independent body which oversees the Guidelines, have been consulting on a more fundamental update of the Guidelines since July 2024. That consultation closed on 30 September and a new version of the Guidelines has now been published.
Definition of PE firms
The definition of a private equity firm will be clarified, to make it clearer that the Guidelines are only intended to apply to firms whose strategies focus on acquiring controlling stakes in companies, rather than by circumstance (for example, a debt for equity swap).
Refining the scope of relevant transactions
Previously, UK portfolio companies were within scope of the Guidelines if a majority of equity or control was acquired by one or more private equity firms and, at the time of acquisition:
Following the review, there will now be a single threshold test for both public to private and private to private deals. The revised Guidelines focus on the enterprise value at the time of the transaction and have increased the threshold to £500 million. In addition, to be in scope, the company must either (i) have more than £200 million of revenue, at least 50% of which is generated in the UK or (ii) employ more than 1,000 full time equivalent employees in the UK.
The BVCA says that the increased threshold is driven by the significant increase in size of comparable listed companies since 2007, while the addition of a minimum revenue test of £200 million is designed to exclude companies which do not have a significant economic impact and were never intended to be caught by the Guidelines.
In addition, PERG is planning to introduce a mechanism that will allow companies that increase or decrease in size during the private equity firm's period of ownership to join or leave the Walker population. Further work is being undertaken on this aspect of the Guidelines and more details will be announced next year.
The revised Guidelines also include some small changes to the criteria for determining whether infrastructure assets are in scope.
In an update to the reporting requirements for portfolio companies that fall into scope, the revised Guidelines have added or enhanced portfolio company disclosure requirements in three main areas: principal risks and uncertainties; environmental matters; and diversity, equity and inclusion (DEI).
As regards risk management, the portfolio company will now be expected to explain how the board "promotes the long-term sustainable success of the company by identifying opportunities to create and preserve value, and establishes oversight for the identified and mitigation of risks". This narrative report should also cover risk management objectives and policies in light of the principal risks and uncertainties facing the company, including those relating to leverage.
On environmental matters, the revised Guidelines include new requirements for climate disclosures, including on greenhouse gas (GHG) emissions and on transition planning. Many large private companies are already required to disclose some of this information under existing UK law, but the Guidelines now mandate it for companies in scope and go beyond the legal requirements in certain areas.
Walker companies will be required to disclose information on whether they have established a clear DEI policy aligned with their overall business strategy and include details of that policy. There are also requirements to include some demographic data on gender and to state whether the company is a signatory to any DEI initiatives.
Portfolio companies will be permitted to cross reference to other publicly available disclosures that contain the relevant information about sustainability performance and risks and opportunities; for example, TCFD or CSRD reports. Appropriate caveats should accompany references to third-party sources.
Also on 18 December, the BVCA and PERG published its annual review of compliance with the Guidelines and its review of portfolio company performance (prepared by EY). PERG reports that 90% (81 of 90) companies within scope of the Guidelines complied, at least in part. It also publicly names the non-compliant companies, none of which were owned by a BVCA member firm.
