Presentation of the bookThe Vernimmen is the affectionate name of a corporate finance textbook whose initial author was Pierre Vernimmen and which aims to cover the full scope of corporate finance as it is practiced today worldwide.
A way of thinking about financeWe are very pleased with the success of the first three editions of the book. It has encouraged us to retain the approach in order to explain corporate finance to students and professionals. There are four key features that distinguish this book from the many other corporate finance text books available on the market today:
- Our strong belief that financial analysis is part of corporate finance. Pierre Vernimmen, who was mentor and partner to some of us in the practice of corporate finance, understood very early on that a good financial manager must first be able to analyse a company’s economic, financial and strategic situation, and then value it, while at the same time mastering the conceptual underpinnings of all financial decisions.
- Corporate Finance is neither a theoretical textbook nor a practical workbook. It is a book in which theory and practice are constantly set off against each other, in the same way as in our daily practice as investment bankers, as board members of several listed and unlisted companies, as business angels and as teachers at the Bocconi and HEC Paris business schools.
- Emphasis is placed on concepts, intended to give you an understanding of situations, rather than on techniques, which tend to shift and change over time. We confess to believing that the former will still be valid in 20 years’ time, whereas the latter will for the most part be long forgotten!
- Financial concepts are international, but they are much easier to grasp when they are set in a familiar context. We have tried to give examples and statistics from all around the world to illustrate the concepts.
The five sectionsThis book starts with an introductory chapter reiterating the idea that corporate financiers are the bridge between the economy and the realm of finance. Increasingly, they must play the role of marketing managers and negotiators. Their products are financial securities that represent rights to the firm’s cash flows. Their customers are bankers and investors. A good financial manager listens to customers and sells them good products at high prices. A good financial manager always thinks in terms of value rather than costs or earnings.
Section I goes over the basics of financial analysis, i.e. understanding the company based on a detailed analysis of its financial statements. We are amazed at the extent to which large numbers of investors neglected this approach during the latest stockmarket euphoria. When share prices everywhere are rising, why stick to a rigorous approach? For one thing, to avoid being caught in the crash that inevitably follows.
Return to reason has also return financial analysis to its rightful place as a cornerstone of economic decision-making. To perform financial analysis, you must first understand the firm’s basic financial mechanics (Chapters 2–5). Next you must master the basic techniques of accounting, including accounting principles, consolidation techniques and certain complexities (Chapters 6–7), based on international (IFRS) standards now mandatory in over 80 countries, including the EU (for listed companies), Australia, South Africa and accepted by the SEC for US listing. In order to make things easier for the newcomer to finance, we have structured the presentation of financial analysis itself around its guiding principle: in the long run, a company can survive only if it is solvent and creates value for its shareholders. To do so, it must generate wealth (Chapters 9 and 10), invest (Chapter 11), finance its investments (Chapter 12) and generate a sufficient return (Chapter 13). The illustrative financial analysis of the Italian appliance manufacturer Indesit will guide you throughout this section of the book.
Section II reviews the basic theoretical knowledge you will need to make an assessment of the value of the firm. Here again, the emphasis is on reasoning, which in many cases will become automatic (Chapters 15–19): efficient capital markets, the time value of money, the price of risk, volatility, arbitrage, return, portfolio theory, present value and future value, market risk, beta, etc. Then we review the major types of financial securities: equity, debt and options, for the purposes of valuation, along with the techniques for issuing and placing them (Chapters 20–26).
The central section, the third one, is devoted to value, to its theoretical foundations and to its computation. Value is the focus of any financier, bothits measure and the way it is shared. Over the medium term, creating value, is most of the time, the first aim of managers (Chapters 26 – 31).
In Section IV, “Corporate financial policies”, we analyse each financial decision in terms of:
- value in the context of the theory of efficient capital markets;
- balance of power between owners and managers, shareholders and debtholders (agency theory);
- communication (signal theory).
In this section, we draw your attention to today’s obsession with earnings per share, return on equity and other measures whose underlying basis we have a tendency to forget and which may, in some cases, be only distantly related to value creation. We have devoted considerable space to the use of options (as a technique or a type of reasoning) in each financial decision (Chapters 32–39).
When you start reading Section V, “Financial management”, you will be ready to examine and take the remaining decisions: setting up and financing a start-up, how to organise a company’s equity capital and its governance, listing a company, buying and selling companies, mergers, demergers, LBOs, bankruptcy and restructuring (Chapters 40–47). Lastly, this section presents cash flow management, working capital management and the management of the firm’s financial risks (Chapters 48–50).
Last but not least, the epilogue address the question of the links between finance and strategy
Suggestions for the readerTo make sure that you get the most out of your book, each chapter ends with a summary, a series of problems and questions (a total of 827, with the solutions provided).
We’ve used the last page to provide a cribsheet (the nearly 1000 pages of this book summarised on one page!).
For those interested in exploring the topics in greater depth, there is an end-of-chapter bibliography and suggestions for further reading, covering fundamental research papers, articles in the press, published books and web sites.
A large number of graphs and tables (over 100!) have been included in the body of the text which can be used for comparative analyses.
Finally, there is a fully comprehensive index.
The masculine pronoun has been used throughout this book simply for convenience and brevity. This use is not intended to be discriminatory in any way.
An Internet site with huge and diversified contentVernimmen.com provides free access to tools (formulas, tables, statistics, lexicons, glossaries), resources that supplement the book (articles, prospectuses of financial transactions, financial figures for over 16,000 European, North American and emerging countries listed companies, thesis topics, thematic links, a list of must-have books for your bookshelf, an Excel file providing detailed solutions to all of the problems set in the book), plus problems, case studies, and quizzes for testing and improving your knowledge.
There is a letterbox for your questions to the authors (we reply within 72 hours, unless of course you manage to stump us!).
There are questions and answers and much more.
The site has its own internal search engine, and new services are added regularly.
The Internet site is already visited by over 1000 unique visitors a day.
A teacher’s area provides teachers with free access to case studies, slides and an Instructor’s Manual, which gives advice and ideas on how to teach all of the topics discussed in the Vernimmen.
A free monthly newsletter on corporate financeSince (unfortunately) we can’t bring out a new edition of the Vernimmen every month, we have set up the Vernimmen.com Newsletter, which is sent out free of charge to subscribers by Internet. It contains:
- A conceptual look at a topical corporate finance problem (e.g. Four mistakes to be avoided at all costs when financing a start-up)
- Statistics and tables that you are likely to find useful in the day-to-day practice of corporate finance (e.g. Cash and cash-equivalent as a % of total assets).
- A critical review of a financial research paper with a concrete dimension (e.g. Access to equity markets: a tool for growth and innovation).
- A question left on the vernimmen.com site by a visitor plus a response (e.g. How to take into account customer risk when choosing an investment).
We hope that you will gain as much enjoyment from your Vernimmen – whether you are a new student of corporate finance or are using it to revise and hone your financial skills –as we have had in editing this edition and in expanding the services and products that go with the book.
We wish you well in your studies!
Pascal Quiry Maurizio Dallocchio
Yann Le Fur Antonio Salvi
What the users say
I discovered finance with ‘The Vernimmen' about 30 years ago. Since then the different versions have accompanied me throughout my career and throughout the world. Not only was the alignment of the successive editions looking good in my different offices but I must confess I have opened and cherished each of them. Whether an investment banker, a CFO in a universal bank or more simply a world banker...
Managing Director and CFO Of The World Bank
I opened my first Vernimmen in 1982. After having spent just a few weekends reading it, I felt better equipped for my role in financial management at Paribas. Now at Apax, the Vernimmen remains my companion in my search for value creation (key in the private equity industry).
Associated Director, Apax Partners
Vernimmen's Corporate Finance is an outstanding clear and complete manual, a wonderfulmerger of practice and theory. Its coverage of the market aspects of corporate finance distinguishes its content, but its treatment of all the material makes it essential reading for the student, financier or industrialist.
Senior Research Fellow in Finance at Saïd Business School, University Of Oxford
The book itself covers all the important techniques that a financial manager must have in his repertoire of tools. The exposition is clear and concise and, most importantly, relies on commonsense reasoning throughout. This is not a book with obscure formulae, yet is still rigorous and at the same time a model of clarity.
Joel Fried Professor Of Applied Finance at UCLA Anderson
Corporate Finance is a very useful reference book for students and for operators who will get a great help in the present complex environment to learn the principles of the financial markets and their practical application. Written in a consequential and logical approach it shows also some interesting cases that make the study easier and stimulating.
Chairman of Telecom Italia
The book, newsletter, and website are all very interesting and useful. The book is 47 chapters (about 1 000 pages) full of corporate finance. I have to agree with the authors: “It is a book in which theory and practice are constantly set off against each other …” I really like it. Especially the emphasis not so much on techniques (“which tend to shift and change over time”). Very well done ! Moreover, the authors also put out a monthly newsletter and have a web site that could stand alone as one of the best in the business. Check it out !
Associate Professor of Finance at St. Bonaventure University,
author of www.financeprofessor.com
As a Mexican-born, French-educated, German-based portfolio manager, I've worked and invested in several European countries. The multi-country content of the “Corporate Finance: Theory and Practice” book makes it my preferred companion as I work in a cross-border environment. Its international focus is the perfect complement to my multicultural experience.
CFA Portfolio Manager,
Union Investment Privatfonds GmbH
This book was for sure the first Finance book I read as a student in my twenties.
I read it again in my thirties to review some of the key Finance challenges I was facing in my professional life and I am now, in my forties, reviewing it another time to compare the reality I have to face now in Asia, with the most advanced financial concepts. I have never been disappointed and have always been able to find the appropriate answer to my questions, as well as food for thought…
Vernimmen is not another book on Finance: this is Finance as a life experiment.
CFO Christian Dior Perfumes
This corporate finance textbook makes the difference. It is an outstanding and unique blend of the theory and the practice, European flavour and world perspective, and traditional topics and emerging themes. Above all, the book is an excellent manual for teachers, students, and corporate managers.
Bang Dang Nguyen,
Assistant Professor of Finance,
the Chinese University of Hong Kong
As a business student, I appreciated this book for being both exhaustive with almost 1,000 pages and easy to digest. The strengths of this book are its conversational writing style and emphasis on practical problem solving. For example, the four-stage framework for financial analysis presented here is a simple yet rigorous tool to understand a company's financial situation. Plus the authors make theory come alive with the use of concrete examples with real companies.
This book was a fine introduction to corporate finance and continues to be a useful reference for me.
Hock Kim Teh,
Associate McKinsey Frankfurt
"The understanding of Corporate Finance is a key issue to successfully manage a company. From a banker's point of view, a good understanding of Corporate Finance is crucial to assist a company.
The "Vernimmen", written for Europeans by Europeans is a most useful reference for the student as well as the practitioner. The style of the book is concise, yet every conceivable aspect of Corporate Finance is covered.
Complemented by an exhaustive website containing summaries of key concepts, of formulae, and of financial statements of a wide range of companies, the "Vernimmen" is a must."
Professor of Finance
Director of the Institute of Banking and Finance, HEC+FAME, University of Lausanne
"This book efficiently bridges financial theory and practice, and encapsulates everything a corporate finance banker will ever need to know and understand. It is obvious that the authors are passionate about finance, and their enthusiasm is contagious. Written in an easy and accessible style, this book deserves to become a reference work."
Equity Capital Markets
This book is unique - one of the ultimate study and reference guides for European financiers from students to CFOs.
The French-language versions of the "Vernimmen" have been for me one of the most helpful and trusted companions throughout my professional career.
Partner at Deloitte in charge of Corporate Finance for the European media and telecom sector
I 'm glad to learn that Vernimenn unique Book on finance is now available for english-reading speakers. I have known this excellent book for many years, which all professionals can easily use when they need to go back to the basics of modern corporate finance. Smartly written, thorough, lively, regularly updated. I strongly recommend it to every one: from the beginner in Finance to high level experts. Learning with Vernimmen is a real pleasure.
Antoine Giscard d'Estaing,
CFO of Schneider Electric
"Vernimmen's Corporate Finance, long overdue in English, is an outstandingly clear and complete manual, a wonderful merger of practice and theory. Its coverage of the market aspects of corporate finance and of European practices distinguishes its content, but its treatment of all the material makes it an essential reading for the student, financier or industrialist."
Former worldwide head of equity capital markets at BNP Paribas,
now a fellow in finance at the Saïd Business School, Oxford University.
"This book is particularly useful for those people who look for the bridge between strategic, operational and investment decisions, on one hand, and financial accounts, on the other hand. Authors' approach,
which consists of guiding the reader from financial accounting to most complex deals that have strategic implications for firms, is new and very useful. I would recommend this book to those who want to succeed in in-house and external consulting world as well as in the corporate finance area."
Vice President and Director of the Moscow office,
The Boston Consulting Group.
I opened my first Vernimmen in 1982. After having spent a few weekends reading it, I became the seasoned financier that I was expected to be at Paribas. Now at Apax, it is still with the Vernimmen that I hone my value creation skills that are key in the private equity world.
Written in a fluent and readable style and supplemented by numerous real-world examples, “Corporate Finance: Theory and Practice” has served as an excellent aid to my studies of finance. The book’s broad content has been indispensable in acquiring a better understanding of all the core areas of finance, ranging from the basics of financial analysis through to the workings of complex M&A transactions and cutting edge financial products.
student at ESCP Europe
"What sets the Vernimmen apart from other text books is its integration of practice and current affairs in a rigorous theoretical framework. Recipes and pontification are replaced by a scientific aproach. And, thanks to the Newsletter, this is done practically in real time!"
Professor of Finance at the Solvay Brussels School,
Executive Director of Texaf
"Corporate finance is a lively subject that changes from day to day and evolves regularly, depending on new market developments. The Vernimmen is a true bible of corporate finance. With regular updates through their monthly newsletter and upgrades, the authors have made it applicable to any place, any time. This is pretty unique in the field. "
Swicorp, Head of Advisory