Tài liệu Corporate finance corporate finance theory and practice (1)

Pierre Vernimmen Corporate Finance Theory and Practice Pascal Quiry Maurizio Dallocchio Yann Le Fur Antonio Salvi Corporate Finance This book is unique – one of the ultimate study and reference guides for European financiers from students to CFOs. The French-language versions of the Vernimmen have been for me some of the most helpful and trusted companions throughout my professional career. Dan Arendt, Corporate Finance partner at Deloitte in Luxembourg This book is particularly useful for those people who look for the bridge between strategic, operational and investment decisions on one hand, and financial accounts on the other. The authors’ approach, which consists of guiding the reader from financial accounting to most complex deals that have strategic implications for firms, is new and very useful. I would recommend this book to those who want to succeed in both the in-house and the external consulting world, as well as in the area of Corporate Finance. Stephan Dertnig, Vice President, Moscow Office, The Boston Consulting Group I’m glad to hear that Vernimmen’s unique book on finance is now available for English-speaking readers. I have known this excellent book for many years, which all professionals can easily use when they need to go back to the basics of modern Corporate Finance. Smartly written, thorough, lively, and regularly updated. I strongly recommend it to everyone – from the debutant in finance to high-level experts. Learning with Vernimmen is a real pleasure. Antoine Giscard d’Estaing, CFO of Danone Vernimmen’s Corporate Finance, long overdue in English, is an outstandingly clear and complete manual, a wonderful merger of practice and theory. Its coverage of the market aspects of Corporate Finance and of European practices distinguishes its content, but its treatment of all the material makes it essential reading for the student, financier or industrialist. Howard Jones, Fellow in Finance at the Saı̈d Business School, Oxford University, UK This book was the first finance book I read as a student in my twenties. I read it again in my thirties to review some of the key finance challenges I was facing in my professional life. Now, in my forties, I am reviewing it once more to compare the reality I have to face now in Asia, with the most advanced financial concepts. I have never been disappointed and have always been able to find the appropriate answer to my questions, as well as food for thought. I am sure my children will read it when I am in my fifties, as Vernimmen is not just another book on finance: this is finance as a life experiment. I strongly recommend this book to all the corporate managers facing new questions or challenges in their professional lives, especially in an international multi-currency context. You do not need to be a finance expert to enjoy reading it, as it’s really easy to understand, with enough explanations, concrete examples . . . and humour, to help you jump successfully into the most sophisticated theories. But, if you are an expert, you will also find food for thought, as its methodological bases are strong enough to satisfy the most demanding CFO. Jean-Michel Moutin, CFO, Louis Vuitton Asia Pacific-Japan Understanding Corporate Finance is key to successful company management. From a banker’s point of view, a good understanding of Corporate Finance is crucial to assist a company. The Vernimmen, written for Europeans by Europeans is a most useful reference for the student as well as the practitioner. The style of the book is concise, yet every conceivable aspect of Corporate Finance is covered. Complemented by an exhaustive website containing summaries of key concepts, of formulae, and of financial statements from a wide range of companies, the Vernimmen is a must. Michael Rockinger, Professor of Finance, Director of the Institute of Banking and Finance, HEC & FAME, University of Lausanne, Switzerland This book efficiently bridges financial theory and practice, and encapsulates everything a Corporate Finance banker will ever need to know and understand. It is obvious that the authors are passionate about finance, and their enthusiasm is contagious. Written in an easy and accessible style, this book deserves to become a reference work. Jan Zarzycki, Director, Equity Capital Markets, Deutsche Bank Pierre Vernimmen Corporate Finance Theory and Practice Pascal Quiry Maurizio Dallocchio Yann Le Fur Antonio Salvi Copyright # 2005 John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England Telephone: (þ44) 1243 779777 Email (for orders and customer service enquiries): [email protected] Visit our Home Page on www.wiley.com All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning or otherwise, except under the terms of the Copyright, Designs and Patents Act 1988 or under the terms of a licence issued by the Copyright Licensing Agency Ltd, 90 Tottenham Court Road, London W1T 4LP, UK, without the permission in writing of the Publisher. Requests to the Publisher should be addressed to the Permissions Department, John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex PO19 8SQ, England, or emailed to [email protected], or faxed to (þ44) 1243 770620. Adapted and updated from the original French, first published by Éditions Dalloz, Paris, 1994 (sixth edition 2005). Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The Publisher is not associated with any product or vendor mentioned in this book. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the Publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought. Other Wiley Editorial Offices John Wiley & Sons Inc., 111 River Street, Hoboken, NJ 07030, USA Jossey-Bass, 989 Market Street, San Francisco, CA 94103-1741, USA Wiley-VCH Verlag GmbH, Boschstr. 12, D-69469 Weinheim, Germany John Wiley & Sons Australia Ltd, 42 McDougall Street, Milton, Queensland 4064, Australia John Wiley & Sons (Asia) Pte Ltd, 2 Clementi Loop #02-01, Jin Xing Distripark, Singapore 129809 John Wiley & Sons Canada Ltd, 22 Worcester Road, Etobicoke, Ontario, Canada M9W 1L1 Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library ISBN-13 978-0-470-09225-5 (PB) ISBN-10 0-470-09225-4 (PB) Project management by Originator, Gt Yarmouth, Norfolk (typeset in 10/12pt Times and Meta) Printed and bound in Great Britain by Scotprint, Haddington, Scotland This book is printed on acid-free paper responsibly manufactured from sustainable forestry in which at least two trees are planted for each one used for paper production. 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). Antonio Salvi is an Assistant Professor of Finance at Bocconi and the University of 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 Louis Vuitton on its merger with Moët Henessy to create LVMH, the world luxury goods leader) and a finance teacher at HEC Paris. His book, Finance d’Entreprise, was and still is the top-selling financial textbook in French-speaking countries and 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 9 Margin analysis: Structure 155 10 Margin analysis: Risks 178 11 Working capital and capital expenditures 193 12 Financing 217 13 Return on capital employed and return on equity 232 14 Conclusion of financial analysis 252 Section II Investment analysis 259 Part One Investment decision rules 261 15 The financial markets 263 16 The time value of money and Net Present Value (NPV) 290 57 17 The Internal Rate of Return (IRR) 309 6 Getting to grips with consolidated accounts 73 18 Incremental cash flows and other investment criteria 327 7 How to cope with the most complex points in financial accounts 94 19 Measuring value creation 345 20 Risk and investment analysis 367 Part Two The risk of securities and the cost of capital 385 21 Risk and return 387 Foreword by Richard Roll xvi Preface xviii List of frequently used symbols xxii 1 What is corporate finance? Section I Financial analysis 1 15 Part One Fundamental concepts in financial analysis 17 2 Cash flows 19 3 Earnings 29 4 Capital employed and invested capital 44 5 Walking through from earnings to cash flow Part Two Financial analysis and forecasting 8 How to perform a financial analysis 121 123 Summary 22 The cost of equity 419 23 From the cost of equity to the cost of capital 443 24 The term structure of interest rates 461 Section III Corporate financial policies Part One Financial securities 473 475 25 Enterprise value and financial securities 477 26 Debt securities 485 27 Managing net debt 512 28 Shares 538 29 Options 556 30 Hybrid securities 577 31 Selling securities 601 Part Two Capital structure policies 635 32 Value and corporate finance 637 Part Three Equity capital and dividend policies vii 753 37 Internal financing: Reinvesting cash 755 flow 38 Returning cash to shareholders: Dividend policies 768 39 Capital increases 792 Section IV Financial management 809 Part One Valuation and financial engineering 811 40 Valuation 813 41 Choice of corporate structure 844 42 Taking control of a company 873 43 Mergers and demergers 894 44 Leveraged buyouts (LBOs) 912 45 Bankruptcy and restructuring 923 Part Two Managing net debt and financial risks 937 46 Managing cash flows 939 47 Asset-based financing 956 48 Managing financial risks 972 992 33 Capital structure and the theory of perfect capital markets 657 34 The tradeoff model 668 Glossary 35 Debt, equity and options theory 698 Index 1002 Vernimmen.com 1031 Cribsheet 1032 36 Working out details: The design of the capital structure 716 Contents Foreword by Richard Roll Preface List of frequently used symbols 1 What is corporate finance? 1.1 1.2 1.3 1.4 1.5 The financial manager is first and foremost a salesman . . . . . . of financial securities . . . . . . valued continuously in the financial markets Most importantly, he is a negotiator . . . . . . and he remembers to do an occasional reality check! Section I Part One Financial analysis Fundamental concepts in financial analysis 2 Cash flows 2.1 2.2 Operating and investment cycles Financial resources 3 Earnings 3.1 3.2 Additions to wealth and deductions to wealth Different income statement formats 4 Capital employed and invested capital 4.1 4.2 4.3 4.4 The balance sheet: definitions and concepts The capital-employed analysis of the balance sheet A solvency-and-liquidity analysis of the balance sheet A detailed example of a capital-employed balance sheet 5 Walking through from earnings to cash flow 5.1 5.2 Analysis of earnings from a cash flow perspective Cash flow statement 6 Getting to grips with consolidated accounts 6.1 6.2 6.3 Consolidation methods Consolidation-related issues Technical aspects of consolidation xvi xviii xxii 1 1 4 7 10 11 15 17 19 20 22 29 29 34 44 45 47 51 53 57 57 61 73 73 80 85 Contents 7 How to cope with the most complex points in financial accounts 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 7.10 7.11 7.12 7.13 7.14 7.15 7.16 7.17 7.18 7.19 Accruals Construction contracts Convertible bonds and loans Currency translation adjustments Deferred tax assets and liabilities Dilution profit and losses Exchangeable bonds Goodwill Intangible fixed assets Inventories Leases Mandatory convertible bonds Off-balance-sheet commitments Preference shares Perpetual subordinated loans and notes Provisions Stock options Tangible fixed assets Treasury shares Part Two Financial analysis and forecasting 8 How to perform a financial analysis 8.1 8.2 8.3 8.4 8.5 8.6 8.7 8.8 What is financial analysis? Economic analysis of companies An assessment of a company’s accounting policy Standard financial analysis plan The various techniques of financial analysis Ratings Scoring techniques Expert systems 9 Margin analysis: Structure 9.1 9.2 9.3 9.4 9.5 How operating profit is formed How operating profit is allocated Financial assessment Pro forma income statements (individual and consolidated accounts) Case study: Ericsson 10 Margin analysis: Risks 10.1 10.2 10.3 10.4 How operating leverage works A more refined analysis provides greater insight From analysis to forecasting: the concept of normative margin Case study: Ericsson 11 Working capital and capital expenditures 11.1 The nature of working capital 11.2 Working capital turnover ratios 94 95 95 96 97 97 99 100 100 101 104 106 108 108 110 111 111 115 116 117 121 123 123 125 137 138 139 142 143 144 155 156 166 167 172 172 178 178 182 187 188 193 193 197 ix x Contents 11.3 Reading between the lines of working capital 11.4 Analysing capital expenditures 11.5 Case study: Ericsson 201 207 210 12 217 218 220 227 Financing 12.1 A dynamic analysis of the company’s financing 12.2 A static analysis of the company’s financing 12.3 Case study: Ericsson 13 Return on capital employed and return on equity 13.1 13.2 13.3 13.4 Analysis of corporate profitability Leverage effect Uses and limitations of the leverage effect Case study: Ericsson 14 Conclusion of financial analysis 14.1 14.2 14.3 14.4 Solvency Value creation Financial analysis without the relevant accounting documents Case study: Ericsson Section II Part One 232 232 234 243 246 252 252 254 255 256 Investment analysis 259 Investment decision rules 261 15 The financial markets 15.1 15.2 15.3 15.4 15.5 15.6 15.7 The rise of capital markets The functions of a financial system The relationship between banks and companies From value to price (1): financial communication From value to price (2): efficient markets Limitations in the theory of efficient markets Investors’ behaviour 16 The time value of money and Net Present Value (NPV) 16.1 16.2 16.3 16.4 16.5 16.6 16.7 Capitalisation Discounting Present value and net present value of a financial security The NPV decision rule What does net present value depend on? Some examples of simplification of present value calculations Special NPV topics 17 The Internal Rate of Return (IRR) 17.1 17.2 17.3 17.4 How is internal rate of return determined? Internal rate of return as an investment criterion The limits of the internal rate of return Some more financial mathematics: interest rate and yield to maturity 263 263 268 270 271 272 277 282 290 290 294 296 297 298 299 302 309 309 310 310 317 Contents 18 Incremental cash flows and other investment criteria 18.1 18.2 18.3 18.4 The predominance of NPV and the importance of IRR The main lines of reasoning Which cash flows are important? Other investment criteria 19 Measuring value creation 19.1 19.2 19.3 19.4 Accounting criteria Economic criteria Market criteria Putting things into perspective 20 Risk and investment analysis 327 327 329 333 334 345 348 353 357 359 20.1 A closer look at risk 20.2 The contribution of real options 367 368 373 Part Two 385 21 The risk of securities and the cost of capital Risk and return 21.1 21.2 21.3 21.4 21.5 21.6 Sources of risk Risk and fluctuation in the value of a security Tools for measuring return and risk How diversification reduces risk Portfolio risk Measuring how individual securities affect portfolio risk: the beta coefficient 21.7 Choosing among several risky assets and the efficient frontier 21.8 Choosing between several risky assets and a risk-free asset: the capital market line 21.9 How portfolio management works 22 The cost of equity 22.1 22.2 22.3 22.4 22.5 22.6 22.A Return required by investors: the CAPM Properties of the CAPM The limits of the CAPM model Multifactor models The cost of equity based on historical returns The cost of equity based on current market prices A formal derivation of the CAPM 23 From the cost of equity to the cost of capital 23.1 23.2 23.3 23.4 23.5 The cost of capital and the  of assets Alternative methods for estimating the cost of capital Some practical applications Can corporate managers influence the cost of capital? Cost of capital: a look at the evidence 387 387 389 392 394 396 401 405 407 411 419 420 424 425 429 432 434 440 443 443 444 450 453 455 xi xii Contents 24 The term structure of interest rates 24.1 24.2 24.3 24.4 24.5 Fixed income securities and risk The different interest rate curves Relationship between interest rates and maturities The stochastic approach to modelling the rate structure A flashback Section III Part One Corporate financial policies Financial securities 25 Enterprise value and financial securities 25.1 25.2 25.3 25.4 A completely different way of looking at things Debt and equity Overview of how to compute enterprise value Valuation by discounting free cash flows 26 Debt securities 26.1 26.2 26.3 26.4 26.5 26.6 Basic concepts The yield to maturity Floating rate bonds Other debt securities The volatility of debt securities Default risk and the role of rating 27 Managing net debt 27.1 27.2 27.3 27.4 27.5 27.6 General features of corporate financing Marketable debt securities Bank debt products Leasing Project financing Investment of cash 28 Shares 28.1 28.2 28.3 28.4 Basic concepts Price/Earnings ratio Key market data Adjusting per-share data for technical factors 29 Options 29.1 29.2 29.3 29.4 29.5 29.6 Definition and theoretical foundation of options Mechanisms used in pricing options Analysing options Parameters to value options Methods for pricing options Tools for managing an options position 461 461 463 466 469 469 473 475 477 477 478 480 480 485 487 489 492 495 499 503 512 512 517 520 527 530 533 538 538 545 548 550 556 557 559 561 564 566 570 Contents 30 Hybrid securities 30.1 30.2 30.3 30.4 Warrants Convertible bonds Preference shares Other hybrid securities 31 Selling securities 31.1 31.2 31.3 31.4 31.5 31.6 31.7 General principles in the sale of securities Initial public offerings (IPOs) Capital increases Block trades of shares Bonds Convertible and exchangeable bonds Syndicated loans Part Two Capital structure policies 32 Value and corporate finance 32.1 32.2 32.3 32.4 32.5 The purpose of finance is to create value Value creation and markets in equilibrium Value and organisation theories How can we create value? Value and taxation 33 Capital structure and the theory of perfect capital markets 33.1 The evidence from the real world 33.2 The capital structure policy in perfect financial markets 34 The tradeoff model 34.1 34.2 34.3 34A The The The The benefits of debt costs of debt tradeoff model capital structure choice: the Endesa case 35 Debt, equity and options theory 35.1 35.2 35.3 35.4 Analysing the firm in light of options theory Contribution of the options theory to the valuation of equity Using options theory to analyse a company’s financial decisions Resolving conflicts between shareholders and creditors 36 Working out details: The design of the capital structure 36.1 36.2 36.3 36.4 36.5 36.6 36A The major concepts Competitors, lifecycle and other capital structure determinants Other factors affecting the capital structure choice Effects of the financing choice on accounting and financial criteria Working out the details of the capital structure Capital structure policies: a look at the evidence Capital structure design: the Alitalia case 577 578 582 588 591 601 601 607 613 618 620 626 626 635 637 637 640 644 650 651 657 658 660 668 669 681 687 695 698 699 701 704 708 716 717 722 726 729 733 741 747 xiii xiv Contents Part Three 37 Equity capital and dividend policies Internal financing: Reinvesting cash flow 37.1 Reinvested cash flow and the value of equity 37.2 Internal financing and the various stakeholders 37.3 Internal financing and return criteria 38 Returning cash to shareholders: Dividend policies 38.1 38.2 38.3 38.4 Dividends and market value Dividend distribution in practice Share buybacks Taxation of dividends, share buybacks and capital reduction 39 Capital increases 39.1 39.2 39.3 39.4 A definition of capital increase Capital increases and finance theory Old and new shareholders Capital increases and financial criteria Section IV Part One Financial management Valuation and financial engineering 753 755 756 759 760 768 768 772 778 783 792 792 794 796 799 809 811 40 Valuation 813 40.1 40.2 40.3 40.4 40.5 40.6 40.7 Overview of the different methods Premiums and discounts Valuation by discounted cash flow Multiple approach or peer group comparisons The sum-of-the-parts method and Restated Net Asset Value (RNAV) Example: valuation of Ericsson Comparison of valuation methods 813 814 818 826 832 835 837 844 844 853 857 865 867 41 Choice of corporate structure 41.1 41.2 41.3 41.4 41.5 Shareholder structure Initial Public Offerings (IPOs) and corporate governance How to strengthen control over a company Financial securities’ discounts Organising a diversified group 42 Taking control of a company 42.1 The rise of mergers and acquisitions 42.2 Choosing a negotiating strategy 42.3 Taking over a listed European company 43 Mergers and demergers 43.1 All-share deals 43.2 The mechanics of all-share transactions 43.3 Demergers and splitoffs 873 873 877 882 894 894 899 904 Contents 44 Leveraged buyouts (LBOs) 44.1 LBO structures 44.2 The players 44.3 LBOs and financial theory 912 912 915 920 45.1 Causes of bankruptcy 45.2 Bankruptcy and financial theory 45.3 An illustrative example of financial restructuring 923 923 928 931 Part Two 937 45 Bankruptcy and restructuring Managing net debt and financial risks 46 Managing cash flows 46.1 46.2 46.3 46.4 Basic tenets Cash management Cash management within a group Investment of cash 47 Asset-based financing 47.1 47.2 47.3 47.4 Reasons for using asset-based financing Main techniques Accounting treatment Consequences for financial analysis 48 Managing financial risks 48.1 48.2 48.3 48.4 The various sources of financial risk Measuring financial risks Principles of financial risk management Organised markets–OTC markets Glossary Index Vernimmen.com Cribsheet 939 939 942 947 951 956 956 958 964 968 972 972 973 975 985 992 1002 1031 1032 xv Foreword by Richard Roll Thirty years ago, when I lived and worked in Europe, only a handful of financial scholars resided on that continent and no finance texts had a European focus. How things have changed! This book is a wonderful example of the progress that has been made. Pierre Vernimmen became an important catalyst for change when he published (in French) one of the first European-oriented corporate finance texts in the 1970s. It is now available in English, updated, expanded and rendered invaluable not only to students but also to practising financial managers. The book itself covers all the important techniques that a financial manager must have in his repertoire of tools. Its scope is breathtaking: from the basics of financial analysis through accounting, capital markets, risk, arbitrage, portfolio analysis, options, agency and signalling concepts, to the ultimate goal of corporate finance, decision making about equity issuance, leverage, mergers, bankruptcy and other important financial events. The exposition is clear and concise and, most importantly, relies on commonsense reasoning throughout. This is not a book with obscure formulae, yet is still rigorous and at the same time a model of clarity. Two noteworthy attributes of the book are, first, its association with an excellent website and, second, the commitment of the authors to issue a monthly newsletter with updated research information about topical issues. In the December 2004 newsletter, for example, we find a tabulation of corporate income tax rates compared across countries and traced over time. There are also fascinating articles about forming a European-wide company, on how joining or leaving an index affects an individual firm’s stock price and on whether it makes sense for European firms to list their stock on an American exchange (in general, it doesn’t). The website is even better. It provides lots of data to those who feel a burning need to perform a few statistical calculations. It has an extensive glossary and a comprehensive research bibliography about every important topic in finance. It even has quizzes to test your financial acumen, cross-referenced against chapters in Corporate Finance where the answers, given briefly on the Web, are explained in detail. I enjoyed going through these quizzes even though getting a few wrong answers was humbling. It seems to me that the European focus of this book is entirely appropriate for European financial managers and for students who wish to pursue careers in finance. There are enough international differences in legal systems, accounting methods and management practices to make a focused text invaluable. Of course, the basic principals of finance are universal, but examples, case studies, problem sets and quizzes are much more transparent when they involve a familiar and realistic setting. In summary, if I were teaching corporate finance in Europe or Foreword by Richard Roll consulting with a financial team at a European company, I would strongly urge everyone, from students up through the CFO, to possess this book. It contains the answers to most questions that financial managers ask every day and, most importantly, the answers are easy to find. Richard Roll Japan Alumni Chair in International Finance at the UCLA Anderson School xvii