Current Challenges for Corporate Finance (eBook)

This book is a product of Roland Berger Strategy Consultants' Academic Network. Under the leadership of Dr. Tobias Raffel, the network brings together professors and Roland Berger Partners to work on current business topics that are equally relevant in theory and practice.

Contents 6
Introduction 10
The Paradox of Strategic Corporate Finance 10
The Transition to Strategic Corporate Finance 12
Structure of this Book 13
1 Old and New Financial Paradigms 15
1.1 Research into Financial Theory 15
1.2 Old Finance 16
1.3 Neoclassical Finance 18
1.4 Modern Portfolio Theory and Option PriceTheory 20
1.5 Empirical Financial Market Research 23
1.6 Corporate Finance 26
1.7 Strategic Corporate Finance 29
1.7.1 On the Attractiveness of Markets and theImpotence of Market Players 29
1.7.2 Complexity-Driven Problems with Valuation 31
1.7.3 Information Imbalances in Markets 32
1.7.4 Combining the Provision of Knowledge and Capital 33
2 Mergers and Acquisitions 35
2.1 Managers and Investors as Market Players 35
2.2 Traditional Collaboration Strategies 37
2.3 Growth Driven by Strategic CorporateFinance 40
2.3.1 Diversifying Business Activities 41
2.3.2 Adapting the Product Portfolio to MarketRequirements 43
2.3.3 First-Mover Advantage for Market Pioneers 45
2.3.4 Access to Resources and Fluid Market Boundaries 47
2.4 Different Growth Strategies 50
3 Corporate Communication 51
3.1 The Content of Corporate Communication 51
3.2 Who Is Corporate Communication Aimedat? 54
3.3 Generic Communication Strategies 56
3.4 Communication Strategies for Mergers andAcquisitions 59
3.4.1 Aligning Product Portfolios with MarketRequirements 60
3.4.2 First-Mover Advantage in Networks 63
3.4.3 Diversification with a View to Forminga Conglomerate 65
3.4.4 Fluid Market Boundaries and Access to Resources 68
3.5 Strategic Financial Communication:Case Study -- Bertelsmann 69
4 New Forms of Funding in StrategicCorporate Finance: EntrepreneurialFinance, Venture Capital, PrivateEquity and Hedge Funds 71
4.1 Private Financial Investors Who BackInnovation and Growth 71
4.2 Entrepreneurial Finance andVenture Capital 74
4.2.1 From Invention to Innovation 74
4.2.2 Entrepreneurial Finance for the Early Stages 75
4.2.3 Venture Capital Financing for the Expansion Stage 77
4.2.4 Private Equity to Top up Venture Capital 78
4.3 Private Equity Funding 79
4.3.1 Buyouts Designed to Maintain, Realign orRestructure a Company's Operations 80
4.3.2 Financial LBOs --- Breaking up and Selling out 83
4.4 Hedge Fund Financing 85
5 The Importance of CSR Capitalfor Sustainable Strategic CorporateFinance 88
5.1 Introduction 88
5.2 The Financial Markets' Role in Showcasingthe New Concept of Value 88
5.3 Quality Criteria for Defining "Good" Capitaland "Good" Finance 90
5.3.1 The Origin of Funds 91
5.3.2 The Use of Funds 94
5.3.3 Current Trends: The "Locust" Phenomenon 97
5.4 The Framework for Institutional Action 101
5.5 On the Role of Speculation 102
5.6 The Value Discussion Revisited? 103
5.7 The Valuation Functionof the Financial Markets 106
5.8 The Real Economy Versus Speculation:An Answer to the Question of Quality? 107
5.9 The Role of Ratings and Certification 108
5.10 Summary 110
6 Investor Churn 113
6.1 The Investment Landscape Today 113
6.2 Investor Churn: A New Phenomenon? 115
6.2.1 Corporate Raiders --- Developments in the 1980s 115
6.2.2 The "New Economy" Emerging ---Developments Between the 1990s and 2002 116
6.2.3 A Worldwide Hype in M& A and Private EquityActivities --- Developments Between 2002 and 2007
6.2.3 Blankness After the Hype?! ---Developments Since 2007 120
6.3 How the Advent of International InvestorGroups Is Rewriting the Rules of CorporateManagement 122
6.3.1 Alternative Financing Options Thanks to NewInvestor Groups --- Consequences for Companies 122
6.3.2 How the Advent of International Investor GroupsIs Rewriting the Rules of Corporate Management ---Consequences for Management 123
6.4 Conclusion and Outlook 126
About the Authors 129