Achieving Fair Value. How Companies Can Better Manage Their Relationships with Investors

  • ID: 2216636
  • Book
  • 256 Pages
  • John Wiley and Sons Ltd
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If you were to ask a number of CEOs of large public companies what they considered the most demanding aspect of their job, you might expect it to be managing the business itself, dealing with difficult customers and employees, handling capital allocation issues or cash flow.

You would be wrong.

The most common response is managing the relationship with the financial markets and institutional investors. Dealing with the markets accounts for up to 25% of a CEO′s time and 35% of a CFO′s, making it the single biggest drain on a company′s most valuable resource. Despite this, few companies have a formal investor strategy and the goals they set with regard to their investors are also often not clear. By default, it is all too easy for companies to slip into the trap of seeking to maximise shareprice, which in turn holds real dangers of destroying long term shareholder value.

Achieving Fair Value is the first book to explore the issue of what might constitute a robust investor strategy for a large quoted company. It focuses on a range of processes and methodologies by which a company can improve the way it deals with its institutional investors, in the process reducing investor churn and managing down shareprice volatility. At the core of this approach to managing investors is the notion of fair value the pursuit of a market value which fairly reflects the fundamental, long term value creation potential of the business.

"Achieving Fair Value provides clearly written, intelligent insight into the relationship between companies and the financial analysis community. By illustrating the share valuation process, and the costs of being over– or undervalued, Mark Scott′s book calls for senior management to be strategic and forward thinking. One thing is certain, the return on investment in Achieving Fair Value is outstanding!"
Kai Peters, Chief Executive, Ashridge

"Mark Scott′s book contributes some much needed strategic thinking to the often ill–understood interface between quoted companies and the institutions that invest in them."
Tony Golding, author of ′The City: Inside the Great Expectation Machine′ and Ex–fund Manager, UK

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Acknowledgements v

The fair value process vi

Introduction: What is fair value and why does it matter? 1

Part One: The Imperative for a Fair Value Strategy 7

1 Getting the goals right 9

What should management be trying to achieve on behalf of shareholders?

2 Why do the markets get it wrong? 21

Why do markets fail to identify fair value?

3 Understanding the institutional fund manager 47

Why do fund managers behave as they do and what can management do about it?

Part Two: The Building Blocks of Fair Value 69

4 Towards a fair value strategy 71

Understanding the fair value process

5 Determining fair value 81

How do you know when your company is fairly valued?

6 Targeting value–determining investors 119

Identifying the shareholders that matter

7 Profiling value–determining investors 135

Getting to know the culprits

Part Three: Delivering a Fair Value Strategy 147

8 Towards fair value levers 149

Knowing a good lever from a bad lever

9 Deciding how much to tell investors 163

When ignorance is not bliss

10 Deciding how to tell investors 187

The art of managing communications channels

11 The role of management quality 201

Setting the fair value context

Part Four: The Challenge of Managing for Fair Value 221

12 Managing a fair value strategy 223

The challenge of coordination

13 What to expect from the next decade 231

Bibliography 238

Index 242

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"Outlines a systematic process for identifying, understanding and influencing " (Long Range Planning, August 2006)
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