The Financial Times reports that British Telecom chairman Sir Michael Rake, the man charged with policing the BVCA's guidelines, fears that last year's political firestorm over private equity could reignite quickly if a big buyout collapsed.
Private equity faced a barrage of accusations last year - from job-cutting and asset-stripping, to tax avoidance and excessive use of debt - after bidding for several FTSE 100 companies, such as Alliance Boots and J. Sainsbury, the high-street retailers. "If there were to be a major failure in a private equity-financed vehicle, then for sure there would be political attention," he says. "This industry isn't stupid and is fully aware this is something we need to do."
The slew of huge global LBO deals in 2006 and 2007 brought an unprecedented amount of attention to private equity firms, which traditionally had operated under the radar of politicians and observers outside of the world of finance. Widespread knowledge of the profit margins buyout shops were reaping prior to the credit crunch caused a backlash against leveraged buyouts in the U.K. and on the European continent. The slowdown in LBO deals, coupled with efforts by private equity to improve its image seems to have headed off legislation aimed at the industry in the U.K. and European Union -- for the time being. However organizations like the BVCA worry that a rash of bankruptcies by PE portfolio companies like that seen in the U.S. could once again spur lawmakers to consider wider regulation of buyout shops. - George White
See story from the Financial Times
See Dealscape post on BVCA guidelines
See Dealwatch on PE-backed bankruptcies
See Dealwatch on busted buyouts
The British Private Equity and Venture Capital Association's success at getting firms to sign on to its new voluntary transparency rules hasn't yet taken the industry out of the sights of politicians ready to regulate the industry.
