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The Essential CFO: A Corporate Finance Playbook

The Essential CFO A Corporate Finance Playbook

  • Author:
  • Publisher: John Wiley & Sons
  • ISBN: 9781118173046
  • Published In: April 2012
  • Format: Paperback , 349 pages
  • Jurisdiction: International or US ? Disclaimer:
    Countri(es) stated herein are used as reference only
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    Discover the power of the CFO's role in delivering shareholder value

    During the past decade, the CFO role has expanded dramatically in its breadth, complexity, and criticality. Filled with proven strategies, best practices, and keen insights, The Essential CFO describes how today's CFOs are responding to their expanded roles within both public and private companies. With straightforward and pragmatic guidance, author Bruce Nolop shows how CFOs are partnering with CEOs to deliver shareholder value by articulating a strategic plan, determining capital allocations, managing the capital structure, driving financial performance, and implementing strategic transactions.

    • Covers how CFOs are establishing robust accounting and risk management processes and effectively communicating with both external and internal constituencies
    • Looks at the role of the CFO in transforming financial organizations to drive effectiveness and efficiencies
    • Examines how CFOs can develop talent with the experience, expertise, and leadership skills to meet the challenges of the future

    Written from a balanced, top-down perspective of the modern CFO, The Essential CFO provides you with practical prescriptions for executing impactful corporate finance strategies.

  • Introduction xv

    PART I: STRATEGY

    Chapter 1: Articulating a Strategic Plan 3

    Business Objectives 4

    Strategic Themes 5

    Long-Term Financial Model 7

    Total Shareholder Return 10

    Capital Allocation Strategies 14

    Acquisition Strategies 15

    Target Shareholders 17

    Elevator Pitch 20

    Plan Revisions 21

    Chapter 2: Communicating and Achieving Alignment 23

    Consistency and Transparency 24

    Incentive Compensation Programs 25

    Investor Alignment 28

    Analyst Relations 29

    Investor Presentations 31

    Company Website 35

    Social Media 36

    Media Relations 37

    Potential Media Pitfalls 38

    Coordinating Communications 39

    Interview Formats 39

    Media Training 40

    Note 42

    Chapter 3: Assessing Enterprise Risks 43

    Enterprise Risk Management 43

    Implementation of ERM 44

    Risk Identification 45

    Risk Quantification 46

    Major Exposures 47

    Mitigation Strategies 50

    Rewarded versus Unrewarded Risks 51

    Governance of ERM 52

    CFO’s Role in ERM 54

    PART II: CAPITAL ALLOCATIONS

    Chapter 4: Estimating the Cost of Capital 59

    WACC Formula 59

    Hurdle Rates 63

    Risk Premiums 63

    Acquisition Cost of Capital 65

    Chapter 5: Prioritizing Capital Investments 67

    Cash Flow Projections 67

    Investment Budget 68

    Evaluating Projects 71

    Categorizing Projects 74

    Monitoring Projects 75

    Pension Fund Contributions 77

    Chapter 6: Considering Dividends and Repurchases 79

    Dividend Policy Alternatives 80

    Dividend Policy Considerations 82

    Special Dividends 85

    Dividend Declarations 85

    Repurchase Considerations 86

    Open Market Programs 90

    Tender Offers 92

    Retaining Strategic Cash 92

    Cash Investment Policies 95

    PART III: MERGERS AND ACQUISITIONS

    Chapter 7: Identifying Acquisition Candidates 99

    Rationale for Acquisitions 99

    Adjacent Spaces 100

    Portfolio Approach 101

    Business Sponsor 101

    Patience and Flexibility 102

    Strategic Purpose 102

    Types of Acquisitions 103

    Note 107

    Chapter 8: Evaluating Acquisition Candidates 109

    Valuation Methodologies 109

    Standalone and Synergy Values 112

    Pro Forma Analyses 113

    Acquirer’s Stock Valuation 116

    Risk Considerations 116

    Chapter 9: Executing a Merger or Acquisition 119

    Due Diligence 119

    Business Plan 123

    Financial Projections 124

    Financing Plan 126

    Price Negotiations 128

    Contract Terms 129

    Acquisition Integration 132

    Note 134

    Chapter 10: Executing Divestitures and Spinoffs 135

    Divestiture Evaluations 135

    Hiring Investment Bankers 136

    Auction or Negotiated 137

    Stock or Assets 139

    Financing Conditions 139

    Management Participation 140

    Tax-Free Spinoffs 141

    Split-Ups 142

    Equity Carve-Outs 143

    Chapter 11: Responding to Takeover Offers 145

    Governance Policies 145

    Reviewing an Offer 146

    Conducting a Sale Process 148

    Activist Shareholders 149

    Going Private Transactions 149

    PART IV: FUNDING

    Chapter 12: Establishing Capital Structure Objectives 153

    Leverage Targets 153

    Leverage Criteria 155

    Rating Agencies 157

    Ratings Categories 158

    Rating Agency Dialogues 160

    Ratings Criteria 161

    Informing Investors 162

    Note 163

    Chapter 13: Developing Financing Strategies 165

    Financing Principles 165

    Debt Financing 167

    Equity Financing 171

    Off Balance Sheet Financing 174

    Debt Covenants 177

    Debt Refinancings 179

    Debt for Equity Swaps 180

    Bankruptcy 182

    Chapter 14: Ensuring Short-Term Liquidity 185

    Bank Lines 185

    Cash Planning 187

    Contingency Planning 187

    Liquidity Ratios 189

    Working Capital Strategies 189

    Trapped Cash 191

    PART VI: ACCOUNTING AND CONTROLS

    Chapter 15: Obtaining Long-Term Financing 193

    Venture Capital 193

    Private Equity 194

    Initial Public Offering 195

    Subsequent Equity Offerings 198

    Term Loans 200

    Syndicated Bank Loans 200

    Investment Grade Securities 200

    High Yield Securities 201

    Strategic Alliances 202

    Note 203

    PART V: PERFORMANCE

    Chapter 16: Driving Business Performance 207

  • Bruce Nolop retired in 2011 after a 35-year career as an investment banker and corporate executive, including more than a decade as chief financial officer of Pitney Bowes and E*TRADE Financial. He has been a board member of Marsh & McLennan since January 2008 and currently serves on the audit, compliance and risk, finance, and corporate responsibility committees.

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