The Essential CFO E-Book

Bruce P. Nolop

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Serie: Wiley Corporate F&A
• Sprache: Englisch

Seitenzahl: 505

Veröffentlichungsjahr: 2012

Beschreibung

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.

Leseprobe

Contents

Cover

Series

Title Page

Copyright

Dedication

Introduction

EVOLVING JOB DESCRIPTION

STRATEGIC CFO

EXPANDED ROLES

ABOUT THIS BOOK

NOTES

PART ONE: Strategy

Chapter One: Articulating a Strategic Plan

BUSINESS OBJECTIVES

STRATEGIC THEMES

LONG-TERM FINANCIAL MODEL

TOTAL SHAREHOLDER RETURN

CAPITAL ALLOCATION STRATEGIES

ACQUISITION STRATEGIES

TARGET SHAREHOLDERS

ELEVATOR PITCH

PLAN REVISIONS

Chapter Two: Communicating and Achieving Alignment

CONSISTENCY AND TRANSPARENCY

INCENTIVE COMPENSATION PROGRAMS

INVESTOR ALIGNMENT

ANALYST RELATIONS

INVESTOR PRESENTATIONS

COMPANY WEBSITE

SOCIAL MEDIA

MEDIA RELATIONS

POTENTIAL MEDIA PITFALLS

COORDINATING COMMUNICATIONS

INTERVIEW FORMATS

MEDIA TRAINING

NOTE

Chapter Three: Assessing Enterprise Risks

ENTERPRISE RISK MANAGEMENT

IMPLEMENTATION OF ERM

RISK IDENTIFICATION

RISK QUANTIFICATION

MAJOR EXPOSURES

MITIGATION STRATEGIES

REWARDED VERSUS UNREWARDED RISKS

GOVERNANCE OF ERM

CFO'S ROLE IN ERM

PART TWO: Capital Allocations

Chapter Four: Estimating the Cost of Capital

WACC FORMULA

HURDLE RATES

RISK PREMIUMS

ACQUISITION COST OF CAPITAL

Chapter Five: Prioritizing Capital Investments

CASH FLOW PROJECTIONS

INVESTMENT BUDGET

EVALUATING PROJECTS

CATEGORIZING PROJECTS

MONITORING PROJECTS

PENSION FUND CONTRIBUTIONS

Chapter Six: Considering Dividends and Repurchases

DIVIDEND POLICY ALTERNATIVES

DIVIDEND POLICY CONSIDERATIONS

SPECIAL DIVIDENDS

DIVIDEND DECLARATIONS

REPURCHASE CONSIDERATIONS

OPEN MARKET PROGRAMS

TENDER OFFERS

RETAINING STRATEGIC CASH

CASH INVESTMENT POLICIES

PART THREE: Mergers and Acquisitions

Chapter Seven: Identifying Acquisition Candidates

RATIONALE FOR ACQUISITIONS

ADJACENT SPACES

PORTFOLIO APPROACH

BUSINESS SPONSOR

PATIENCE AND FLEXIBILITY

STRATEGIC PURPOSE

TYPES OF ACQUISITIONS

NOTE

Chapter Eight: Evaluating Acquisition Candidates

VALUATION METHODOLOGIES

STANDALONE AND SYNERGY VALUES

PRO FORMA ANALYSES

ACQUIRER'S STOCK VALUATION

RISK CONSIDERATIONS

Chapter Nine: Executing a Merger or Acquisition

DUE DILIGENCE

BUSINESS PLAN

FINANCIAL PROJECTIONS

FINANCING PLAN

PRICE NEGOTIATIONS

CONTRACT TERMS

ACQUISITION INTEGRATION

NOTE

Chapter Ten: Executing Divestitures and Spinoffs

DIVESTITURE EVALUATIONS

HIRING INVESTMENT BANKERS

AUCTION or NEGOTIATED

STOCK OR ASSETS

FINANCING CONDITIONS

MANAGEMENT PARTICIPATION

TAX-FREE SPINOFFS

SPLIT-UPS

EQUITY CARVE-OUTS

Chapter Eleven: Responding to Takeover Offers

GOVERNANCE POLICIES

REVIEWING AN OFFER

CONDUCTING A SALE PROCESS

ACTIVIST SHAREHOLDERS

GOING PRIVATE TRANSACTIONS

PART FOUR: Funding

Chapter Twelve: Establishing Capital Structure Objectives

LEVERAGE TARGETS

LEVERAGE CRITERIA

RATING AGENCIES

RATINGS CATEGORIES

RATING AGENCY DIALOGUES

RATINGS CRITERIA

INFORMING INVESTORS

NOTE

Chapter Thirteen: Developing Financing Strategies

FINANCING PRINCIPLES

DEBT FINANCING

EQUITY FINANCING

OFF BALANCE SHEET FINANCING

DEBT COVENANTS

DEBT REFINANCINGS

DEBT FOR EQUITY SWAPS

BANKRUPTCY

Chapter Fourteen: Ensuring Short-Term Liquidity

BANK LINES

CASH PLANNING

CONTINGENCY PLANNING

LIQUIDITY RATIOS

WORKING CAPITAL STRATEGIES

TRAPPED CASH

Chapter Fifteen: Obtaining Long-Term Financing

VENTURE CAPITAL

PRIVATE EQUITY

INITIAL PUBLIC OFFERING

SUBSEQUENT EQUITY OFFERINGS

TERM LOANS

SYNDICATED BANK LOANS

INVESTMENT GRADE SECURITIES

HIGH YIELD SECURITIES

STRATEGIC ALLIANCES

NOTE

PART FIVE: Performance

Chapter Sixteen: Driving Business Performance

ORGANIC REVENUE GROWTH

COST REDUCTION STRATEGIES

FIXED VERSUS VARIABLE COSTS

NOTE

Chapter Seventeen: Providing Planning and Analysis

BUDGETS

FORECASTS

CASH FLOWS

PERFORMANCE METRICS

BUSINESS UNIT METRICS

PERFORMANCE REPORTS

BUSINESS ANALYSIS

Chapter Eighteen: Managing Financial Risks and Taxes

INSURANCE

INTEREST RATES

CURRENCIES

COMMODITIES

INFLATION

PENSION FUND

TAX PLANNING

PART SIX: Accounting and Controls

Chapter Nineteen: Establishing Accounting Processes

FINANCIAL REPORTING

SEC FILINGS

EXTERNAL AUDITORS

AUDIT COMMITTEE

NOTE

Chapter Twenty: Communicating Financial Results

EARNINGS CALL

NON-GAAP MEASURES

EARNINGS GUIDANCE

NOTE

Chapter Twenty-One: Implementing Sarbanes-Oxley

OVERVIEW OF PROVISIONS

AUDITOR INDEPENDENCE

CERTIFICATION OF FINANCIALS

ASSESSMENT OF INTERNAL CONTROLS

Chapter Twenty-Two: Reinforcing Compliance and Controls

CONTROL ENVIRONMENT

AUDITOR AND BOARD SUPPORT

FOREIGN CORRUPT PRACTICES ACT

FRAUD PREVENTION

WHISTLEBLOWERS

COST OF COMPLIANCE

NOTE

PART SEVEN: Leadership

Chapter Twenty-Three: Achieving Finance Transformation

ORGANIZATIONAL STRUCTURE

TECHNOLOGY SYSTEMS

PROCESS REENGINEERING

OUTSOURCING ADVANTAGES

OUTSOURCING IMPLEMENTATION

ANALYSIS VERSUS DATA

Chapter Twenty-Four: Developing Financial Talent

RECRUITMENT STRATEGIES

DEVELOPMENT OBJECTIVES

DEVELOPMENT TOOLS

DIVERSITY

FUTURE REQUIREMENTS

NOTE

About the Author

Acknowledgments

Index

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The Wiley Corporate F&A series provides information, tools, and insights to corporate professionals responsible for issues affecting the profitability of their company, from accounting and finance to internal controls and performance management.

Copyright © 2012 by Bruce Nolop. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.

Published simultaneously in Canada.

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Library of Congress Cataloging-in-Publication Data:

Nolop, Bruce, 1950– The essential CFO: a corporate finance playbook/Bruce Nolop. pages cm.—(Wiley corporate F&A) Includes index. ISBN 978-1-118-17304-6 (pbk.); ISBN 978-1-118-22689-6 (ebk); ISBN 978-1-118-24003-8 (ebk); ISBN 978-1-118-26463-8 (ebk) 1. Chief financial officers. 2. Corporations—Finance—Management. I. Title. HG4027.35.N65 2012 658.15—dc23 2011048566

To my mother, Barbara Sandager Nolop

Introduction

THE ROLE OF THE CHIEF FINANCIAL OFFICER (CFO) has evolved at a breathtaking pace in the twenty-first century. As the last century came to a close, financial engineering was in vogue and the recent winners of CFO magazine's prestigious “Excellence in Finance” awards—along with glowingly positive stories—included Scott Sullivan of WorldCom, Andrew Fastow of Enron, and Mark Swartz of Tyco International. This proved embarrassing when all three of these award winners were later indicted for their malfeasance.

EVOLVING JOB DESCRIPTION

Not surprisingly, it wasn't too long before the era of the “Financial Engineer” CFO gave way to the “Trusted” CFO. Since then, we have seen a further evolution in CFO fashions from “Trusted” to “Super Accountant” to “Risk Manager” and, most recently, to “Strategic Partner” in the attributes that are most in demand by recruiters. As expressed by one recruiter, “With the accounting and controls side of the house now in order, a new CFO profile has emerged: a strategic, operationally oriented finance executive who can serve as the business partner to the CEO.”1

To a large extent, the evolution of the CFO position has been fueled by external events such as the Enron and other corporate scandals; the passage of the Sarbanes-Oxley legislation; the introduction of the Fair Disclosure rule; the advent of enterprise risk management; the proliferation of new accounting standards; and, most notably, the widespread fallout from the financial meltdown and credit crisis that exploded on the scene in 2008. Furthermore, companies have experienced new demands arising from enlivened regulatory authorities and from activist shareholders, including the escalating influence of hedge funds and private equity investors.

STRATEGIC CFO

Without question, the CFO position has expanded dramatically in its breadth, complexity, and criticality. In a word, CFOs have indeed become more strategic, reflecting enhanced opportunities to impact a company's program for delivering shareholder value.

In 2005, CFO Research Services prepared a report in collaboration with Booz Allen Hamilton entitled “The Activist CFO—Alignment with Strategy, Not Just with the Business.” In a prescient conclusion, the report noted the following:

And as CEOs are challenged by the external market and their boards of directors, they increasingly need a trusted adviser to help develop and execute corporate strategy. Thus CFOs are poised to take on an expanded and increasingly activist role within their companies. As part of this activist role, CFOs are increasingly aligning their function not just with the business but with the company's overall strategy. And by doing so, they are not just supporting the business with information and analyses, but also ensuring that the entire enterprise delivers on its commitments.2

This report also classified activist CFOs within four groups:

1. “Growth navigators: CFOs who work closely with CEOs to map out an aggressive course to profitable growth through acquisition or organic channels.”

2. “Execution maestros: CFOs who focus on operational excellence and instill in their companies a value discipline that enables them to do more with less.”