Corporate Financial Strategy

Keith Ward

Preface

Part One Putting Financial Strategy in Context

I Defining  Financial strategy
     Overview
     A sustainable competitive advantage
     Increasing shareholder value
     Agency theory
     Management incentive schemes
     Stakeholder groups
     Separating business risk from financial risk
     Conclusion

2 Linking corporate and financial strategies
     Overview
     Introduction
     Product life cycles
     Boston matrix
     Inverse correlation of financial risk
     A logical dividend policy
     Understanding the price/earnings multiple
     The resulting share price movements
     Impact of a diversification strategy
     Applications internally to the divisions of a group

3 Review of theories of finance
     Overview
     Introduction
     Basic equity valuation models
      - Dividend growth models
      - Cash flow valuation models
      - Earnings per share based valuation models
     Underlying asset values
     Taking risk into account: the capital asset pricing model
     Designing an efficient investment portfolio
     Efficient markets: hypothesis or reality
     Raising capital: the theory
     Capital structure in a world of taxation and other imperfections
     The theory of options
     Option pricing models
     The theory relating to dividend policy
     More sophisticated dividend growth models
     Term structure of interest rates
     Conclusion
     Appendix 3A
     Appendix 3B
     Appendix 3C

Part Two Organic Stages of Development - Tailored Financial Strategies

4 Start-up businesses - venture capital
     Overview of Part Two
     Summary of overall model as applied to start-up businesses
     Introduction
     Very high level of business risk
     Corresponding high level of return?
     Need for low financial risk
     Nil dividend pay-out policy
     Venture capital investors
     Case studies and other aspects of financial risk
     Conclusion

5 Growth companies - marketing focused
     Summary of appropriate section of overall model
     Continuing high business risk
     Using capital markets-
     Implications of finance theory
     Case studies - sustaining organic growth?
     Reinvestment projects
     Rights issues - concepts and practice

6 Mature companies - to divi or not?
     Overview of financial strategy model
     Managing the transition to maturity
     Adding value through financial strategy
     Developing a dividend policy
     Other ways of paying dividends
     Case studies - confusing signals

7 Declining businesses - a case for euthanasia?
     Applying the overall model
     The final financial strategy
     Alternative business strategies to delay or avoid death
     Deep discount rights issues
     Adding value by reducing debt ratios
     Conclusion

 Part Three Dynamic Growth

8 Mergers and acquisitions - an overview
     Overview of Part Three
     The underlying economic principles
     Financial strategy in acquisitions
     Playing the e.p.s. game
     Introducing debt financing
     Acquiring higher growth companies
     Using an earn-out formula
     The impact of convertibles
     Conclusion

9 Debt versus equity in practice
     Overview
     Distinguishing between debt and equity
     A more sophisticated distinction - using option theory
     The continuum of modem financial products
     Really innovative forms of financing
     Case studies
     - Introduction
     - A debt-driven deal
     - An enormous equity extravaganza
     Comment

10 Using convertibles
     What is a convertible?
     Structuring a convertible - the basics
     Making it more flexible
     A good issue - case study
     Taking the idea one stage further
     Taking the idea too far?
     The penultimate product
     Case studies - problems caused or increased?

11 Structuring earn-outs and using them with convertibles
     Designing an earn-out
     Potential problems
     Case study 1 - Using it in practice
     Case study 2 - A faster learning curve
     Conclusion

12 Cross-border M & A - the international aspect
     A growing trend
     The strategic logic behind international expansion
     Defensive rather than aggressive strategies
     Increased risks of cross-border deals
     No such thing as a global company

Part Four Changing Strategies - The Role of Finance

13 Restructuring strategies
     Overview of Part Four
     Back to the basics in strategy
     Threat of takeover
     Alternatives to demergers

14 Privatization - two very different views
     Introduction
     Reasons for 'going private'
     Finding a new exit route
     Government sales - the opposite form of privatization
     Privatization in the UK
     Other international experiences of privatization - debt to equity swaps

15 Management buy-outs and buy-ins
     Introduction
     The strategic logic
     Case studies - background
     Structuring the deal - key constraints
     Raising the funding
     Back to the golden rules of financial strategy

Part Five Corporate Finance for Banks and Professional Advisers

16 Developing a sustainable competitive advantage in corporate finance
     Overview: importance of corporate finance to banks and professional advisers
     Introduction
     Corporate finance as a value -added concept
     A new selling approach
     Alternative competitive strategies
     Importance of this change in strategy
     Organizational structure implications
     Deal making process
     Target market definition

17 A financial strategy analytical model
     Objectives of the model
     Overview of model
     Target market definition
     Client business plan
     Information gathering
     Structuring the solution
     Presentation to client
     Implementation and plan update

     Index