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Seize the competitive edge through intelligent, differentiated capital allocation

The intelligent deployment of capital is one of the most effective ways to create long-term value. But despite this, there are very few capital allocation experts on the boards of the largest publicly traded companies, and academic research consistently finds that most firms deploy capital sub-optimally.

Capital Allocation aims to educate senior leaders, board members, investors, students, and anyone interested in business on this important topic. Until now very little has been written on capital allocation outside of academia, even though the strategic deployment of excess capital is an increasingly significant source of competitive advantage for many companies.

David Giroux, Chief Investment Officer for Equities and Multi-Asset and Head of Investment Strategy at T. Rowe Price, covers the entire gamut of capital allocation issues, including optimal capital structure, capital allocation alternatives, mergers & acquisitions, and special situations. Capital Allocation walks you through this critical topic from beginning to end, including:

  • Stories of companies that allocated capital in ways that created significant shareholder value
  • Several real-life decision-making models you can use for strategically allocating your firm’s capital
  • Guidelines for generating high returns in the long term to build sustainable shareholder wealth
Giroux uses academic research, personal experience, and uncomplicated mathematics to reveal approaches and actions that create long-term value. He provides case studies from Kodak, Comcast, Thermo Fisher Scientific, Danaher, General Electric, Microsoft, and others showing how capital allocation has―and hasn’t―worked in real-life situations. And he shows how to use capital allocation to head off possible activist investors.

Capital Allocation offers everything you need to know for deploying capital wisely to outperform your competitors over the long term.

Table of Contents

  1. Cover
  2. Title Page
  3. Copyright Page
  4. Dedication
  5. Contents
  6. Acknowledgments
  7. Chapter 1. The Power of Capital Allocation
  8. Chapter 2. Capital Allocation in a Slow-Growth World
  9. Chapter 3. Optimizing the Capital Structure: Advantages of an Alternatives-Based Capital Allocation Framework
  10. Chapter 4. Five Stress Test Rules for Downturns
  11. Chapter 5. Capital Spending
  12. Chapter 6. Dividends and the Case for Returning Excess Capital to Shareholders
  13. Chapter 7. The “Regular-Special” Dividend: A New Way to Allocate Excess Capital
  14. Chapter 8. The (Alleged) Seven Deadly Sins of Share Repurchase
  15. Chapter 9. How Should Management Teams and Boards Think About Share Repurchase?
  16. Chapter 10. AutoZone: The Power of Intelligent Share Repurchase
  17. Chapter 11. Acquisitions
  18. Chapter 12. Complex Transactions
  19. Chapter 13. Superior Businesses with Lower Valuations
  20. Chapter 14. Private Deals
  21. Chapter 15. Distressed Sellers
  22. Chapter 16. Non-Core Divestitures
  23. Chapter 17. Short-Term Challenges, Long-Term Benefits
  24. Chapter 18. The Rise and Fall of the General Electric Empire
  25. Chapter 19. Inferior Businesses with Higher Valuations
  26. Chapter 20. Low-Return, Strategic Acquisitions: A Cautionary Tale
  27. Chapter 21. Supply/Demand Imbalance
  28. Chapter 22. Short-Term Plug Deal
  29. Chapter 23. Spin-Offs
  30. Chapter 24. Restructuring
  31. Chapter 25. Secular Challenges
  32. Chapter 26. Best Board Practices: The 14-Point Strategic Plan
  33. Chapter 27. Capital Allocation: Establishing a Long-Term Focus and Good Corporate Citizenship
  34. Chapter 28. Conclusions
  35. Appendix: The 14-Point Strategic Plan Checklist
  36. List of Abbreviations
  37. References
  38. Notes
  39. Index
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