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Why is shareholder value so important? Any investor putting
money into your company will expect a financial return as good as, if not better
than, what they can obtain elsewhere. With widespread deregulation, the expansion
of equity markets and the availability of sophisticated financial information
for investors, there is a new global imperative for businesses and managers alike:
maximize value for your shareholders. When the market
looks at a firm's performance, profit and loss statements and price/earnings ratios
no longer convey enough information, and with institutional investors under pressure
to consistently secure the best returns available, they are increasingly looking
to assess the future of an investment. Hence the attention now paid to cashflows
and the "cost of capital" -- the idea that companies have to earn a
certain level of returns to justify the use of the capital that is tied up in
their enterprise. More than ever, mastering valuation has become an essential
skill for managers whenever they make strategic decisions. From
this insight, In Search of Shareholder Value moves on to identify the key
'value drivers' and examines how risk can be calculated. Part I of the book also
looks at the technicalities of Shareholder Value Added (SVA), Cash Flow Return
on Investment(CFROI) and Q ratios and how they might be used to evaluate company
strategy and the use of resources. Shareholder value
is at the heart of value-based management, the subject of Part II. Here we see
how the framework of SHV can integrate the core business processes of creating,
preserving and realizing value. This analysis of a company's constituent parts
and how they are creating or destroying value is followed by action -- aligning
the with SHV goals -- and communication with the market. The book also examines
how the achievement of SHV goals can be rewarded appropriately as these challenges
are met. In a series of unique applications of shareholder
value, the book develops these techniques and shows how they can be customized
and deployed across a range of international markets and specific sectors -- from
pharmaceuticals to banking. The authors outline the first application of SHV to
the special circumstances of mergers and acquisitions and value re-creation in
underperforming businesses.
Finally, the book outlines the enhanced service
of 'value reporting' (VR) that the company of the future will require. Focusing
on the key performance metrics of shareholder value, VR will combine these areas
of accounting to bring a new era of transparency and value creation. In
Search of Shareholder Value is a powerful blueprint for managing the link
between strategy and share price. Dr. Andrew Black
is the director of the Price Waterhouse Business Analysis Team, which is part
of the firm's business development effort. He has worked extensively on shareholder
value models and their application to corporate clients. He has extensive experience
of financial markets and their impact on corporate behaviour as an analyst and
strategist for various banks and fund managers. Philip
Wright is the Global Leader of Shareholder Value Services at Price Waterhouse.
In more than 20 years with the firm, he has been involved with major international
assignments in audit, consulting and corporate finance and recovery. John
E. Bachman is the leader of the Price Waterhouse US ValueBuilder team. Based in
Boston, Mr. Bachman assists the senior management of top-tier companies in a variety
of industries in analyzing and enhancing their shareholder value. He has considerable
experience in helping multinational companies implement significant acquisition
strategies and address acquisition-related integration issues.
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