Strategic corporate finance : applications in valuation and capital structure

Author(s)

• Pettit, Justin

Bibliographic Information

Strategic corporate finance : applications in valuation and capital structure

Justin Pettit

John Wiley & Sons, c2007

• : cloth

Note

Includes bibliographical references (p. 268-275) and index

Description and Table of Contents

Description

Essential guidance for the corporate finance professional - advisor, Board Director, CFO, Treasurer, business development executive, or M&A expert-to ask the right questions and make the critical decisions. Strategic Corporate Finance is a practical guide to the key issues, their context, and their solutions. From performance measurement and capital planning to risk management and capital structure, Strategic Corporate Finance, translates principles of corporate finance theory into practical methods for implementing them. Filled with in-depth insights, expert advice, and detailed case studies, Strategic Corporate Finance will prepare you for the issues involved in raising, allocating and managing capital, and its associated risks. Justin Pettit (New York, NY) draws on his 15 years of senior advisory experience as an investment banker and management consultant. He advises corporate boards and executives on matters of capital structure, financial policy, valuation, and strategy. He also lectures on topics in advanced corporate finance to graduate and undergraduate students at universities in the New York area.

Table of Contents

Preface xi List of Figures xiii List of Tables xv Acknowledgments xvii About the Author xix PART ONE Managing the Left-Hand Side of the Balance Sheet CHAPTER 1 The Cost Of Capital 3 Calculation Pitfalls 3 Market Risk Premium (MRP) 5 Toward a Better Beta 10 The ''Riskless Rate'' 13 The Cost of Debt 14 Global Capital Costs 16 WACC and Hurdle Rates 23 CHAPTER 2 Fix: Finding Your Sources of Value 26 Why Shareowner Value? 27 Performance Measurement Pitfalls 28 Measuring Economic Profit and Value 30 Analyzing the Corporate Portfolio 35 Incorporating the Cost of Capacity 39 Value-Based Strategies and Tactics 43 Managing for Value 45 Balancing Performance with Value 52 CHAPTER 3 Sell: Creating Value Through Divestiture 54 Divestiture Creates Value 56 Sources of Value: Motives for Divestiture 58 Alternative Methods of Disposition 60 What Works Best for Whom? 63 What Happens Longer Term? 64 Practical Impediments to Divestiture 65 Financial Policy Considerations 70 Tax Considerations and Structural Refinements 70 CHAPTER 4 Grow: How To Make M&A Pay 73 M&A Today 73 Transactions that Create Value 77 M&A Fact and Fallacy 81 RX for the ''Conglomerate Discount'' 86 EVA and M&A 88 How ''Serial Acquirers'' Create Value 90 Financial Policy Considerations 93 Financing Growth 94 CHAPTER 5 Cash and The Optimal Capital Structure 97 Trends and Implications 98 How Much Is Too Much? 100 The Costs and Benefits of Excess Cash 105 How the Market Views Excess Cash 108 Optimal Capital Allocation 109 PART TWO Managing the Right-Hand Side of the Balance Sheet CHAPTER 6 An Executive's Guide to Credit Ratings 117 Trends and Implications 117 Empirical Evidence 123 Limitations of Quantitative Credit Analysis 123 What Metrics Matter Most? 126 Case Study: Treatment of Pension and Postretirement Liabilities 131 Multivariate Credit Models 133 Industry Considerations 135 Case Study: Property and Casualty Insurance 135 Application Issues 137 How to Manage Your Agencies 137 Case Study: Illustration of Secured and Unsecured Notching 139 CHAPTER 7 Today's Optimal Capital Structure 141 Value-Based Financial Policy 141 Less Debt Is Now ''Optimal'' 143 Extend Duration When Rates Are Low 146 Maintain Financial Liquidity to ''Insure'' Your Equity 149 A New Perspective on Equity 151 Case Study: Does Tech Need Debt? 154 CHAPTER 8 Dividends and Buybacks: Calibrating Your Shareholder Distributions 160 The Cash Problem 162 Dividends Are Back 163 How Dividends and Buybacks Create Value 165 Should You Increase Your Dividend? 171 How Large Should Your Buyback Program Be? 178 How to Execute Your Share Repurchase Program 181 CHAPTER 9 The Stock Liquidity Handbook 187 Measuring Stock Liquidity 188 The ''Liquidity Discount'' 191 Implications of Stock Illiquidity 192 Solutions to Illiquidity 193 Stock Splits 195 PART THREE Managing the Enterprise CHAPTER 10 Strategic Risk Management: Where ERM Meets Optimal Capital Structure 203 The Value of Risk Management 204 Mapping and Modeling Risk 209 Managing to a Benchmark 213 External Considerations and Constraints 216 ERM Case Study: Metallgesellschaft AG 219 Capital Structure Solutions 220 CHAPTER 11 Best Practices In Hedging 224 Which ''Exposure'' to Hedge 225 Hedge Horizon 230 Hedge Ratio 232 Options versus Forwards 233 Accounting Considerations 235 Implementation 236 CHAPTER 12 ERM Case Study: Reengineering The Corporate Pension 238 Why Now? 239 The Problems with Equity 240 The Case for More Bonds 243 Optimal Capital Structure Reprise 246 Capital Markets Solutions 248 The Boots Case 251 Why It Still Hasn't Happened 252 APPENDIX A Resources 254 Tools and Portals 254 New Research and Literature Search 254 Economic Research and Data 254 News and Market Data 254 Corporate Governance and Compensation 255 Other Agencies 255 Endnotes 256 References 268 Index 277

by "Nielsen BookData"

Details

• NCID: BA81174624
• ISBN:
  • 9780470052648
• LCCN: 2006021653
• Country Code: us
• Title Language Code: eng
• Text Language Code: eng
• Place of Publication: Hoboken, N.J.
• Pages/Volumes: xix, 284 p.
• Size: 24 cm
• Classification:
  • LCC : HG4026
  • DC22 : 658.15
• Subject Headings:
  • LCSH : Corporations -- Finance
  • LCSH : Capital
  • LCSH : Value