Details

<p>About the author xv</p> <p><b>1 ‘BEHIND THE CHINESE WALL’ 1</b></p> <p>Corporate finance in investment banking 2</p> <p>Chinese walls 3</p> <p>Corporate finance assignments 5</p> <p>Flotations/IPOs 6</p> <p>Mergers, acquisitions and divestitures 8</p> <p>Leveraged buyouts and management buyouts 13</p> <p>Financial advice 13</p> <p>Careers in corporate finance 15</p> <p>Organisation of this book 20</p> <p><b>Part I CORPORATE FINANCE TRANSACTIONS 23</b></p> <p><b>2 SOURCES OF CAPITAL 25</b></p> <p>Debt securities 27</p> <p>Money market securities 27</p> <p>Long-term debt 29</p> <p>Floating rate notes 31</p> <p>Equity 32</p> <p>Preference shares 32</p> <p>Ordinary shares 34</p> <p>Hybrids (convertible securities) 36</p> <p><b>3 FLOTATIONS/INITIAL PUBLIC OFFERINGS 39</b></p> <p>Primary offerings 40</p> <p>Ancillary benefits of flotation 46</p> <p>Disadvantages of flotation 46</p> <p>Methods of flotation 47</p> <p>Suitability for listing 49</p> <p>The offering process 52</p> <p>Participants and roles 52</p> <p>Documentation and regulation 55</p> <p>Due diligence and verification 57</p> <p>Marketing, syndication and pricing 59</p> <p>Underwriting 62</p> <p><b>4 INTERNATIONAL EQUITY OFFERINGS 65</b></p> <p>Rationale for international offerings 66</p> <p>International investors 68</p> <p>Development of international equity offerings 69</p> <p>Regulation and documentation 70</p> <p>Depository receipts 73</p> <p>Marketing, syndication and distribution 75</p> <p>Offer structure 76</p> <p>Price setting, underwriting and bookbuilding 77</p> <p>Fees and commissions 79</p> <p>After the new issue 81</p> <p>Stabilisation 81</p> <p><b>5 RIGHTS ISSUES/SECONDARY OFFERINGS 83</b></p> <p>Pre-emption rights 85</p> <p>Setting the price 87</p> <p>Calculating the theoretical rights price 88</p> <p>Rights issue timetable 90</p> <p>Fees and commissions 90</p> <p>Secondary offerings 94</p> <p>Marketed offerings 95</p> <p>Bought deals 96</p> <p>Accelerated bookbuilding 98</p> <p>Demergers 100</p> <p><b>6 MERGERS AND ACQUISITIONS 101</b></p> <p>Rationale for M&A 102</p> <p>Types of merger 104</p> <p>Merger waves 106</p> <p>Financing the transaction 107</p> <p>Bootstrap transactions 109</p> <p>Regulation of M&As 110</p> <p>Key elements of the City Code 111</p> <p><b>7 MANAGEMENT BUYOUTS 115</b></p> <p>Financial structure 118</p> <p>Bank finance (secured lending) 120</p> <p>Private equity funds 122</p> <p>Mezzanine finance 123</p> <p>High-yield bonds 124</p> <p><b>Part II CORPORATE FINANCE TECHNIQUES 127</b></p> <p><b>8 VALUING SECURITIES 129</b></p> <p>Valuing bonds 130</p> <p>Valuing shares and companies 132</p> <p>Cash flow based valuations 135</p> <p>Determination of terminal/residual value 139</p> <p>Determining the discount rate 143</p> <p>Determining the value of the business 143</p> <p>Relative valuations 146</p> <p>Price earnings ratio 148</p> <p>Price/EBIT multiple 149</p> <p>Market to book value 149</p> <p>Dividend yield 150</p> <p>Enterprise value to EBITDA 151</p> <p>Determining the value of a business based on ratios/multiples 152</p> <p><b>9 DETERMINING THE COST OF CAPITAL 159</b></p> <p>Weighted average cost of capital 160</p> <p>Use market values 161</p> <p>Use target/optimal weighting 162</p> <p>After tax 163</p> <p>Match nominal rates with nominal cash flows 163</p> <p>Cost of debt: Kd 165</p> <p>Cost of equity: Ke 166</p> <p>Capital asset pricing model 168</p> <p>Risk-free rate 170</p> <p>Market risk premium (equity risk premium) 170</p> <p>Beta (β) 171</p> <p>Health warning 172</p> <p><b>10 SHAREHOLDER VALUE ADDED (ECONOMIC PROFIT) 173</b></p> <p>Just another number? 174</p> <p>Benefits of SVA 175</p> <p>Calculation of SVA 177</p> <p>Limitations of economic profit calculations 181</p> <p>Appendix: UK CORPORATE VALUATION METHODS: A SURVEY 183</p> <p>Scoring and tables 184</p> <p>A.1 Valuation methodology 185</p> <p>A.1.1 Frequency of use 186</p> <p>A.1.2 Calculation of final valuation or value range 188</p> <p>A.2 Discounted cash flows 189</p> <p>A.2.1 DCF approaches 189</p> <p>A.2.2 Forecast period 190</p> <p>A.2.3 Terminal value 191</p> <p>A.3 Cost of capital 192</p> <p>A.3.1 Determining the cost of equity 192</p> <p>A.3.2 Capital asset pricing model 193</p> <p>Sources of information 197</p> <p>Glossary 199</p> <p>List of abbreviations 211</p> <p>Additional reading 213</p> <p>Index 215</p>

<b>Ross Geddes</b> is a practitioner and educator in the corporate finance world. He has over 20 years of experience working on financings (both debt and equity) as well as M&A transactions. During his corporate finance career in Canada and the UK, he helped corporations and governments raise over $7 billion in equity in IPOs, secondary offerings and privatisations. Ross is the author of three other books on finance. He now resides in Canada.

In <i>An Introduction to Corporate Finance</i>, Ross Geddes provides a complete overview of the fundamentals of corporate finance from an investment banker’s perspective. Split into two distinct sections; the first provides insights into financial advice, careers in corporate finance, sources of capital, mergers and acquisitions, flotations, international equity offerings and rights issues, and management buy-outs. The second section describes the main valuation techniques used to price (or value) companies during the transactions described. It also includes chapters on the determination of the cost of capital and shareholder value. <p>Written by a former investment banker, this book will be of interest to those currently employed or interested in working in the City of London; whether at an investment bank, law firm, or accountancy firm. Others will want to read this book in order to learn more about some of the most eventful and exciting corporate transactions that make the headlines of the business pages.</p>

GB