How much more could your company be worth and how can you help to achieve this? Companies often have enormous potential to increase the intrinsic value of their businesses – and this may often be much greater than management believes or expects. Achieving consistently superior value growth is arguably what distinguishes great companies from all others.
Driving business value as a principle is not new and yet many businesses have failed to grasp that it is something that can be explicitly managed. The process of driving business value, or ‘Managing for Value’, shows how to link long-term goals expressed in the financial strategy with day-to-day management tools, like budgeting. As a process, it requires a fresh look at what each business and function can and should do to unlock new sources of value growth.
This comprehensive 3–day course is designed to help delegates to:
- Understand the key challenges in financial strategy, budgeting and driving business value
- Understand the critically important and often ignored linkages between financial strategy, budgeting and business value
- Develop a value plan framework and link it to the strategy and key performance indicators (KPIs) in the budget
- Develop a master budget and calculate financial KPIs relating to conventional profitability criteria and value creating economic profit criteria
- Understand revenue budgeting and the importance of variance analysis
- Understand capital budgeting and the techniques associated with it
- How to apply capital budgeting techniques in financial strategy analysis
- Apply the principles of economic profit analysis or alternative value-performance related measures
- Understand the importance of non financial budgetary indicators and related frameworks, like the balanced scorecard
- Understand value based management and the principles of managing for value
Day 1
Strategy, performance, planning and control in context - the big picture
- Corporate strategy versus business strategy and difference from operational annual plans and budgeting
- Link between corporate strategy, financial strategy, planning and budgeting
- Managing for value and value based management (VBM) – managing for both short-term profit and long-term value
Basics of budgeting and variance analysis
- Introducing a framework for categorising industry risk across a range of key factors:
- Linking financial strategy, business unit analysis and budgeting
- Budgeting - link with financial statements
- Corporate strategy versus business strategy and difference from operational annual plans and budgeting
- Income and balance sheet analysis
- Ratio and key performance indicator (KPI) analysis
- DuPont framework for analysing business performance
- Classification of ratios
- Profitability ratios
- Liquidity ratios
- Working capital, including the importance of working capital management and the cash conversion cycle
- Debt ratios
- Market ratios
- Capital structure and solvency
- Cash flow analysis
- Z-score analysis
- Variance analysis
- Basics of variance analysis
- Flexible budgeting
- Rolling forecasts
- What are they and how to prepare
- Re-forecasting when there are changes in the environment
- Impact and likelihood analysis
- Actions required to get back on track and achieve the goals
- Behavioural aspects
- Budgeting game
- Need to link with performance measurement and reward systems
Case study: Developing and analysing a financial plan and applying the DuPont framework.
Economic profit analysis, performance measurement and key performance indicators (KPIs)
- Performance measurement, income statement analysis and economic profit
- Understanding and applying economic profit analysis
- Introduction to alternative approaches - Cash Value Added (CVA), Cash Flow Return On Investment (CFROI), and Value Driver Trees (VDTs)
Day 2
Capital budgeting
Interest and time value of money concept and application
- Compound interest, the time value of money and discounted cash flow (DCF) methodology
- Interest rate and inflation relationship - the Fisher effect
Project appraisal/ capital budgeting techniques
- Payback period
- Return on investment
- NPV and (modified) IRR analysis
- Profitability index
- Impact of capital rationing
- Decision-making criteria
- Importance of sensitivity analysis
- Quantitative versus qualitative issues
Group work: Applying the capital budgeting techniques in practice.
Cost of capital and hurdle rates
- Why important
- Portfolio assessment
- Valuation – DCF analysis
- Performance measurement – economic profit
- Determination of the cost of capital
- Weighted average cost of capital
- Cost of equity
- Different methods, e.g. Capital asset pricing model (CAPM)
- Understanding components:
- Risk-free rate
- Beta
- Equity risk premium
- Derivation in developing markets
- Cost of debt
- Different methods -including yield to maturity and credit spread
- Debt:equity mix: book versus market values
- Hurdle rate: what are they and why used
Case study: Reviewing a cost of capital calculation for a publicly traded company.
Day 3
Using the tools of project appraisal to evaluate strategy in financial terms
- Using valuation principles to examine financial strategy
- Valuation components for strategy valuation focussing upon differences from project appraisal and project financing decisions
- Derivation of cash flows using value driver information and financial statements
- Time and competitive advantage period
- Key challenges, e.g. estimating terminal value
- Value drivers - definition and application
- Market signals analysis -triangulation and share price
analysis
Case studies: Strategic value analysis of a publicly traded company.
Managing for value and value based management (VBM)
- Definition and principles
- Managing for both short-term profit and long-term value
- Link between managing for value and operational plans
- Value shifts and conglomerate discount
- Examples, including 'parenting' of strategic business units
- Consolidated versus business perspective - sum of the parts analysis
- How to use the corporate valuation toolkit to value strategic business units
- Deriving the strategic business unit cost of capital and the use of competitive analysis to establish required information
- Managing business units to grow value
- Importance of value perspective
- Importance of relative valuation
- Link with merger and acquisition analysis
Case study: Excel based case study requiring:
- Calculation of the strategic business unit cost of capital
- Calculation of strategic business unit value
- Valuation of the whole company comprising 4 different business units
- Assessment of the issues in deriving an optimal capital structure
Wrap-up and summary
- Putting it all together:
- Interpreting financial strategy in financial terms
- Converting this to a business unit perspective
- Linking the strategic perspective to financial planning and budgeting
Group exercise: brainstorming the challenges in implementation.
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The course director is Emeritus Professor of Finance and Accounting at Henley Business School, University of Reading, and a Visiting Professor of Finance at University College, London.
Currently, he is the CEO of his own group of companies and an advisor to a number of organisations at board level, including one in the Middle East. He has advised numerous companies, financial institutions, and private equity groups, and he has worked extensively in developing markets in Asia, South America, Africa, the Middle East and Central/Eastern Europe. As a private equity investor the course director was a founding member of a group that secured a successful AIM listing on the London Stock Exchange in the late 1990’s.
The course director has a unique blend of academic and business experience. From his academic studies, all undertaken part-time whilst working, he has a PhD in Finance, a Masters in Management Studies (MBA) and a first degree in Psychology, Sociology and Economics. During the professional part of his career he qualified as a Chartered Management Accountant, Company Secretary and Corporate Treasurer. He is a Fellow of the Chartered Institute of Management Accountants, the Institute of Chartered Secretaries and Administrators, and the Association of Corporate Treasurers.
He has written numerous articles and both authored and co-authored many books; the most recent is due for publication in 2013.
Courses run by this instructor
Interested in holding this course in-house? Please fill out your details and a member of our team will be in touch with more information.
28-31 Oct 2013 (Dubai, United Arab Emirates)
A 4-day practical corporate finance course taking you through all the applications of corporate finance from
M&A to IPO's to LBO's.
19-22 Aug 2013 (Manama, Bahrain)
A 4-day training programme for experienced
M&A professionals in investment banks, law
and advisory firms.
17-19 Jun 2013 (Dubai, United Arab Emirates)
24-26 Jun 2013 (Riyadh, Saudi Arabia)
Financial modelling techniques allow users to improve the reliability, quality and timing of their decision making. Modelling techniques are now used in many different areas, such as investment appraisal, capital planning, budgeting, valuation and financial analysis and forecasting. With a step-by-step approach, this course will guide you through the various techniques available, providing you with a comprehensive understanding of advanced modelling, as well as how each technique can be practically applied through the use of Excel.
17-19 Nov 2013 (Riyadh, Saudi Arabia)
This course provides you with a working knowledge of the principles and practices of the financial management of companies and the financial analysis of leveraged buy-outs. It ensures that you acquire a sufficiently thorough understanding of the subject in order to be able to use the tools and techniques in an effective manner.
27-30 Oct 2013 (Dubai, United Arab Emirates)
A 4-day case study-based workshop
exploring issues in company valuation and
financial modelling.
18-20 Nov 2013 (Dubai, United Arab Emirates)
A comprehensive 3-day course for banking experts. The course will teach how to successfully run a corporate banking network, how to manage your clients proactively and how to be responsive to their different needs.
22-24 Oct 2013 (Manama, Bahrain)
This 3-day programme focuses upon how the toolkit of conventional business analysis can be linked sequentially and logically with the principles of financial economics. It will provide critical insight into how the tools and techniques of conventional business analysis can and must be adapted.
17-19 Feb 2014 (Abu Dhabi, United Arab Emirates)
A 3-day workshop designed to demonstrate the benefits of best practice in Excel modelling by building a mobile telecoms model in stages showing how the theory can be integrated into the modelling framework. In particular the workshop outlines the sources of value creation and
potential risks with clear reporting and analysis.
17-19 Dec 2013 (Dubai, United Arab Emirates)
An intensive 3-day, computer based practical training course with case studies and worked examples. With a step-by-step approach, this course will guide you through the various techniques available, providing you with a comprehensive understanding of advanced modelling, as well as how each technique can be practically applied through the use of Excel.
17-19 Jun 2013 (Riyadh, Saudi Arabia)
This 3-day programme focuses upon how the toolkit of managerial accounting can be linked sequentially and logically with the principles of financial economics. It will provide critical insight into how the tools and techniques of management accounting can be adapted and used to be consistent with achieving value growth.
28-30 Oct 2013 (Kuwait City, Kuwait)
The principal aim of the course is enable participants to use Microsoft Excel to prepare logical and easy-to-use financial models to support transactions, forecasts and planning for ongoing business streams. These skills can also be used to support credit approvals and reviews by lenders and to support the organisation to run or sponsor projects. The course will review best practice in model structures and logic, and using tools to highlight areas of risk, particularly in sensitivity analysis.
11-13 Jun 2013 (Dubai, United Arab Emirates)
A 3-day course designed to provide participants with a complete overview of the venture capital industry and its workings.
24-26 Sep 2013 (Doha, Qatar)
This 3-day course provides the industry knowledge to enable participants to produce and interpret useable models of assets and companies in the oil and gas sector.
22-25 Sep 2013 (Riyadh, Saudi Arabia)
This 4-day course provides participants with a working knowledge of the principles and practices of applied corporate finance including financial analysis, modelling and valuation.
9-11 Dec 2013 (Doha, Qatar)