CORPORATE FINANCE Corporate finance Theory and Practice

1059 Pages·2015·8.93 MB·English

Pierre Vernimmen
Corporate
Finance
Theory and Practice
Pascal Quiry
Maurizio Dallocchio
Yann Le Fur
Antonio Salvi

Corporate Finance
Thisbookis unique –one ofthe ultimate studyandreference guidesfor Europeanfinanciers from students
to CFOs.The French-languageversions ofthe Vernimmen havebeen formesome ofthe most helpful and
trusted companionsthroughoutmy professionalcareer.
DanArendt,CorporateFinancepartneratDeloitteinLuxembourg
Thisbookisparticularlyusefulforthosepeoplewholookforthebridgebetweenstrategic,operationalandinvestment
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StephanDertnig,VicePresident,MoscowOffice,TheBostonConsultingGroup
I’mgladtohearthatVernimmen’suniquebookonfinanceisnowavailableforEnglish-speakingreaders.Ihaveknown
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Vernimmen’sCorporateFinance,longoverdueinEnglish,isanoutstandinglyclearandcompletemanual,awonderful
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HowardJones,FellowinFinanceattheSaı¨dBusinessSchool,OxfordUniversity,UK
ThisbookwasthefirstfinancebookIreadasastudentinmytwenties.Ireaditagaininmythirtiestoreviewsomeofthe
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UnderstandingCorporateFinanceiskeytosuccessfulcompanymanagement.Fromabanker’spointofview,agood
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amostusefulreferenceforthestudentaswellasthepractitioner.Thestyleofthebookisconcise,yeteveryconceivable
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MichaelRockinger,ProfessorofFinance,DirectoroftheInstituteofBankingandFinance,
HEC&FAME,UniversityofLausanne,Switzerland
Thisbookefficientlybridgesfinancialtheoryandpractice,andencapsulateseverythingaCorporateFinancebankerwill
everneedtoknowandunderstand.Itisobviousthattheauthorsarepassionateaboutfinance,andtheirenthusiasmis
contagious.Writteninaneasyandaccessiblestyle,thisbookdeservestobecomeareferencework.
JanZarzycki,Director,EquityCapitalMarkets,DeutscheBank
Pierre Vernimmen
Corporate
Finance
Theory and Practice
Pascal Quiry
Maurizio Dallocchio
Yann Le Fur
Antonio Salvi
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About the authors
Pascal Quiry is an adjunct finance teacher in the leading French business school
HEC Paris, and a managing director at BNP Paribas Corporate Finance,
specialising in M&A transactions for listed companies.
Maurizio Dallocchio is the current Dean of the leading Italian business school
Bocconi (Milan) and Lehman Brothers Chair of Corporate Finance. He is also a
board member of several listed and unlisted companies and is one of the most
distinguished Italian authorities on finance.
Yann Le Fur is a corporate finance teacher at HEC Paris business school and an
investment banker with Mediobanca in Paris (after several years with Schroders
and Citigroup).
AntonioSalviisanAssistantProfessorofFinanceatBocconiandtheUniversityof
Venice where he teaches Corporate Finance. His areas of research cover cost of
capital, structure of debt finance and corporate governance.
Pierre Vernimmen, who died in 1996, was both an M&A dealmaker (he advised
LouisVuittononitsmergerwithMoe¨tHenessytocreateLVMH,theworldluxury
goods leader) and a finance teacher at HEC Paris. His book, Finance d’Entreprise,
was andstill isthetop-sellingfinancialtextbookinFrench-speaking countriesand
is the forebear of Corporate Finance: Theory and Practice.
The authors of this book wish to express their profound thanks to the HEC
Paris Business School and Foundation, ABN Amro, Barclays, BNP Paribas,
DGPA, HSBC, Lazard, and Nomura for their generous financial support; also
Matthew Cush, Robert Killingsworth, John Olds, Gita Roux, Steven Sklar and
Patrice Carlean-Jones who helped us tremendously in writing this book.
Summary
Foreword by Richard Roll xvi 9 Margin analysis: Structure 155
Preface xviii 10 Margin analysis: Risks 178
List of frequently used symbols xxii 11 Working capital and capital
expenditures 193
1 What is corporate finance? 1 12 Financing 217
13 Return on capital employed and
Section I return on equity 232
Financial analysis
15 14 Conclusion of financial analysis 252
Part One Section II
Fundamental concepts in Investment analysis
259
financial analysis 17
Part One
2 Cash flows 19
Investment decision rules 261
3 Earnings 29
4 Capital employed and invested 15 The financial markets 263
capital 44
16 The time value of money and Net
5 Walking through from earnings to Present Value (NPV) 290
cash flow 57
17 The Internal Rate of Return (IRR) 309
6 Getting to grips with consolidated
18 Incremental cash flows and other
accounts 73
investment criteria 327
7 How to cope with the most complex
19 Measuring value creation 345
points in financial accounts 94
20 Risk and investment analysis 367
Part Two
Financial analysis and Part Two
forecasting 121 The risk of securities and the
cost of capital 385
8 How to perform a financial
analysis 123 21 Risk and return 387
Summary vii
22 The cost of equity 419 Part Three
Equity capital and dividend
23 From the cost of equity to the
policies 753
cost of capital 443
24 The term structure of interest 37 Internal financing: Reinvesting cash
rates 461 flow 755
38 Returning cash to shareholders:
Dividend policies 768
39 Capital increases 792
Section III
Corporate financial
Section IV
policies
473
Financial management
809
Part One
Financial securities 475 Part One
Valuation and financial
engineering 811
25 Enterprise value and financial
securities 477
40 Valuation 813
26 Debt securities 485
41 Choice of corporate structure 844
27 Managing net debt 512
42 Taking control of a company 873
28 Shares 538
43 Mergers and demergers 894
29 Options 556
44 Leveraged buyouts (LBOs) 912
30 Hybrid securities 577
45 Bankruptcy and restructuring 923
31 Selling securities 601
Part Two
Managing net debt and
financial risks 937
Part Two
Capital structure policies 635 46 Managing cash flows 939
47 Asset-based financing 956
32 Value and corporate finance 637
48 Managing financial risks 972
33 Capital structure and the theory
of perfect capital markets 657
34 The tradeoff model 668 Glossary 992
Index 1002
35 Debt, equity and options theory 698
Vernimmen.com 1031
36 Working out details: The design
of the capital structure 716 Cribsheet 1032