UK - The Treasury Select Committee (TSC) is calling on the Bank of England to look at the impact of economic downturns on the increasing number of leveraged buyouts.
The TSC pointed out "the recent increase in the number of highly-leveraged private equity-owned firms has occurred during a period of economic growth and stability, which is not guaranteed to continue".The body also urged "additional independent monitoring" of transparency in the private equity industry, calling on unions, politicians and the media "to provide greater assurance that compliance will not fall short of the desired level".
In its interim report on private equity, published today, the committee - set up to observe the activities of the UK financial service industry as well as the UK Treasury and associated bodies such as the Bank of England and the Financial Services Authority (FSA) - also called on Sir David Walker to come up with "clear and specific" guidelines on transparency in autumn.
Furthermore, it asked the Walker Committee to make "more detailed proposals for developing a respected capability for providing" comprehensive industry-wide data on the private equity industry.
Commenting on pension arrangements in relation to private equity deals, the TSC noted it was "a vitally important matter…ensuring company pension fund commitments are securely funded when major changes are made to the structure and financing of a company, especially when such changes include an increase in leverage and thus increased risk to pension funds".
The committee stated it "will return to this matter when resuming the inquiry into private equity".
Today's report received mixed reactions from unions and the private equity industry.
The General Union GMB said the paper confirmed its fears about increasing private equity activity.
Brendan Barber, general secretary of the Trade Union Congress (TUC) said: "Even this cautious interim report piles the pressure on private equity. If this is cautious and interim, the final report could well be a humdinger."
The European Private Equity and Venture Capital Association (EVCA) agreed "there is a need to ensure issues such as transparency and accountability are correctly addressed".
However, it warned proposals should be carefully assessed as the Walker Consultation "only addressed the large buyout segment "and inappropriate implementation could have unforeseen negative effects on the growth capital, development capital and mid market buyout segments".
Similarly, suggestions made for the UK should not be expanded to the rest of Europe without prior careful consideration, suggested the EVCA.