KEY POINTS:
The private equity industry, employer of a large percentage of Britons, is expected to be asked to become more transparent and shed its image of secretiveness.
A report, commissioned by the British Private Equity and Venture Capital Association, was expected to advise firms to give more details about
their portfolio companies, as well as suggest new and better ways to communicate with employees, suppliers, the media and the public.
"The new requirements are tough, but we accept that the influence private equity has acquired in the UK economy brings responsibilities," association chief executive Simon Walker wrote in the Financial Times.
Private equity firms, usually headquartered in upscale areas such as London's Mayfair, own businesses like pharmacy chain Alliance Boots, luxury clothing makers Bally and Hugo Boss and restaurant group Giraffe.
"Greater disclosure will help private equity tell its story and lead to proper recognition of the industry as a big part of the mainstream economy," Walker said.
The industry has faced increasing criticism this year from unions, politicians and the public about the tax breaks enjoyed by some of its top managers. The Government recently announced plans to stop the exploitation of such tax loopholes.
The report, assigned in March and chaired by former Morgan Stanley Chairman David Walker, was not expected to refer to taxes.
Its recommendations over disclosure will be of voluntary acceptance, while no proposed changes to regulation are expected, David Walker said in July.
Private equity firms have enjoyed exceptional growth over the past few years, fuelled by abundant credit.
A favourable market allowed Kohlberg Kravis Roberts and TPG Capital to announce the takeover of US company TXU Corp this year, financed with a record US$35.75 ($47.63) billion of debt.
Private equity firms are forecast to raise nearly US$500 billion globally this year, after creating US$430 billion of funds last year.
Large buy-outs have now dried up as turmoil in the credit markets has tightened access to finance.
In Spain, investors are still awaiting a formal offer from TPG and British Airways for Iberia SA, initially expected at the end of October.
An indicative offer was announced in March.
Private equity firms have been criticised for buying companies, gearing them up, firing part of the workforce or selling the company's real-estate assets and then selling what's left three to five years later for a substantial profit.
Advocates of the industry say the firms rescue struggling companies, saving them from insolvency.
Studies on the subjects show conflicting evidence.
Unions have been among the fiercest opponents of private equity firms, saying they don't provide enough security to staff, or their pensions.
Derek Simpson, joint general secretary of Unite, said before the report was released: "Unless the Government enforces some kind of regulation, private equity firms will continue to operate shrouded in secrecy."
- Reuters