Description
John Wiley The Essential CFO A Corporate Finance Playbook 2012 Edition by Bruce P. Nolop
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. Table of contents :- 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 Organic Revenue Growth 207 Cost Reduction Strategies 211 Fixed versus Variable Costs 219 Note 219 Chapter 17: Providing Planning and Analysis 221 Budgets 221 Forecasts 225 Cash Flows 226 Performance Metrics 228 Business Unit Metrics 231 Performance Reports 232 Business Analysis 233 Chapter 18: Managing Financial Risks and Taxes 235 Insurance 235 Interest Rates 238 Currencies 239 Commodities 241 Inflation 242 Pension Fund 243 Tax Planning 244 Chapter 19: Establishing Accounting Processes 251 Financial Reporting 251 SEC Filings 255 External Auditors 259 Audit Committee 259 Note 260 Chapter 20: Communicating Financial Results 261 Earnings Call 261 Non-GAAP Measures 266 Earnings Guidance 267 Note 271 Chapter 21: Implementing Sarbanes-Oxley 273 Overview of Provisions 273 Auditor Independence 274 Certification of Financials 275 Assessment of Internal Controls 276 Chapter 22: Reinforcing Compliance and Controls 281 Control Environment 282 Auditor and Board Support 283 Foreign Corrupt Practices Act 285 Fraud Prevention 287 Whistleblowers 287 Cost of Compliance 288 Note 289 PART VII: LEADERSHIP Chapter 23: Achieving Finance Transformation 293 Organizational Structure 293 Technology Systems 298 Process Reengineering 301 Outsourcing Advantages 303 Outsourcing Implementation 305 Analysis versus Data 308 Chapter 24: Developing Financial Talent 311 Recruitment Strategies 312 Development Objectives 316 Development Tools 320 Diversity 325 Future Requirements 325 Note 326 About the Author 327 Acknowledgments 329 Index 331