Capital Allocation: Principles, Strategies, and Processes for Creating Long-Term Shareholder Value

  • 6h 49m
  • David Giroux
  • McGraw-Hill
  • 2021

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.

In this Book

  • The Power of Capital Allocation
  • Capital Allocation in a Slow-Growth World
  • Optimizing the Capital Structure—Advantages of an Alternatives-Based Capital Allocation Framework
  • Five Stress Test Rules for Downturns
  • Capital Spending
  • Dividends and the Case for Returning Excess Capital to Shareholders
  • The Regular-Special Dividend—A New Way to Allocate Excess Capital
  • The (Alleged) Seven Deadly Sins of Share Repurchase
  • How Should Management Teams and Boards Think about Share Repurchase?
  • Autozone—The Power of Intelligent Share Repurchase
  • Acquisitions
  • Complex Transactions
  • Superior Businesses with Lower Valuations
  • Private Deals
  • Distressed Sellers
  • Non-Core Divestitures
  • Short-Term Challenges, Long-Term Benefits
  • The Rise and Fall of the General Electric Empire
  • Inferior Businesses with Higher Valuations
  • Low-Return, Strategic Acquisitions—A Cautionary Tale
  • Supply/Demand Imbalance
  • Short-Term Plug Deal
  • Spin-Offs
  • Restructuring
  • Secular Challenges
  • Best Board Practices—The 14-Point Strategic Plan
  • Capital Allocation—Establishing a Long-Term Focus and Good Corporate Citizenship
  • Conclusions
  • Appendix
  • List of Abbreviations
  • References
  • Notes