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18 July 2007

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Leveraged buyout (LBO) firms should be more transparent in their dealings and be prepared to give greater information about deals, according to a review of the sector conducted by a British City banker.

David Walker of Morgan Stanley has been conducting the review over a five-month period having been commissioned to do so by the banking industry in a bid to circumvent increasing pressure for greater regulation of the area.

Mr Walker said: "The industry has come to be seen as needlessly secretive, feeding suspicion and in some quarters close to hostility…there is thus a major transparency and accountability gap to be filled."

In response to the study's findings, he has posited that the industry should adopt a voluntary code of conduct, under which private equity companies would issue annual reports and statements online within a four-month period of the year-end and would provide details of their balance sheet management.

The report did however stop short of recommending that legislation is required to bring about a change of approach in the LBO sector, with Mr Walker arguing that such measures would create a "mess".

He added: "If we intervene in a fast-moving business like private equity and legislate, it's very hard to change at a later stage.''

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