Financial Management of the Holding

Syllabus

Thematic definition of lectures: 1. Introduction to the subject Financial Management of The Holding. Defining the essence of the holding and its functioning. Basic financial policies of the holding. Principles and tools applied by the parent company in the management of subsidiaries to achieve the set objectives. Organizational structure of the holding, which is formed by a set of elements and relationships between them. The basic goals of the holding and the benefits of large companies. Specification of individual types of holding according to the focus of their activities. Forms of business associations. 2. Legal regulation of the holding. Existence of holding groups and their legal and economic aspects. Regulation of the holding's business in legal regulations, both national and transnational. Calculation of direct and indirect shares in group companies. Basic terminology of subjects, rights and obligations of individual companies in the holding. Holding as a form of business of a European company. Business combinations, mergers, amalgamations, divisions. Acquisition of a company or its parts and contribution to a company. Types of acquisitions (methods of acquisition, sale) of the company. Business mergers. 3. Business combinations. Structures of business combinations after merger, amalgamation and division. Cross - border merger or amalgamation within the territory of the EEA States. Group of companies and their competencies. Combinations and relationships of companies in a group based on the share of voting rights (subsidiary, joint venture, associate, controlling influence, joint influence and significant influence). Competences of the parent company vis - à - vis subsidiaries as defined in the holding agreement. 4. Financial flows and transfers in the holding. Management of flows and transfers in a holding company, on the basis of which intra-group relations are established. Basic types of relations in the holding (legal, financial, business, technical, labor law). Basic types of flows in the holding (flows based on the payment of dividends, interest, royalties, flows based on transactions with business shares, business transactions). Analysis of holding relationships and transfers. 5. Rules and principles of transfer pricing in a holding company. Valuation of mutual business relations is one of the major problems in accounting and taxation. Its importance is especially among interconnected companies and is one of the key problems in the examination of the tax base by the tax administrator. Theoretical basis of transfer pricing methods. Practical applications of transfer pricing methods (price comparison methods and profit sharing methods). Residual analysis and comparability analysis. Mandatory documentation for transfer pricing. 6. Consolidation of companies in the holding. Obligation to prepare consolidated financial statements for group companies. International Financial Reporting Standards (IFRS) in the holding company. Principles of preparation of consolidated financial statements. Contents of the consolidated financial statements. Procedure for consolidation of financial statements. Methods of consolidation of financial statements (full consolidation method, equity method, equity method). 7. Tax planning in the holding. Tax planning for domestic holdings. Effective income tax rate. Calculation of the effective income tax rate. Possibilities of domestic income optimization. International tax planning. Double taxation treaties. Use of tax havens in tax planning. Reasons for using tax havens by holding companies. Ways and methods of international tax evasion. Elimination of aggressive tax planning. International regulation of tax planning. 8. Approaches to the financial analysis of the holding. Bases of financial analysis in the holding. Horizontal and vertical analysis of statements in the holding company. Analysis of the relationship between assets and resources in the holding. Financial ratios in the holding. Prediction of the holding's financial situation. Analysis of intra-holding transactions. Price application analysis. Analysis of the use of trade credit. Analysis of the application of interest on intra-holding loans. Low capitalization rules. 9. Measuring holding performance. Strategic basis for measuring holding performance. Approaches to measuring holding performance. EVA method (economic added value). MVA method (market value added). Economic profit. CF ROI method (return on investment). CVA method (monetary value added). SVA method (Added value for shareholders). RONA method (Return on net assets). NPV (Net Present Value) method. INFA model (value creation tree). Holding performance measurement systems. Balanced scorecard as a system for measuring holding performance. EFQM model as a system for measuring holding performance. Six Sigma as a holding performance measurement system. BI as a holding performance measurement system. 10. Sources of financing the holding. Financial strategy of financing the holding. Structure of financial resources in the holding. Internal sources of financing of the holding. External sources of financing of the holding. Cost of holding capital. Specific forms of holding financing. Cash flow management in the holding (real cash pooling, fictitious cash pooling). Dividend policy in the holding. 11. Financial planning in the holding. Centralized planning (creating a plan from above). Decentralized planning (bottom plan creation). Strategic planning in the holding. The strategic planning process of the holding. The financial planning process in the holding. Methods of creating a financial plan. Methods of financial management. Creation of financial plans of subsidiaries. Consolidated financial plan of the holding. Capital structure planning of the holding. 12. Management value management. Basic legislative methods of property valuation (property method, business method, combined method, liquidation method, comparative method). Asset valuation methods. Yield methods of asset valuation. Economic value added method. CF ROI method. Basic principles for determining the value of the holding. Value of goodwill and other intangible assets of the holding. 13. Transnational forms of business. Legal regulation of the establishment and business of multinational companies. European Communities. European Economic Interest Grouping. European society. European cooperative. International holdings. The essence and goals of the creation of multinational corporations. The concept of corporation. Corporate identity and strategy. History of multinational corporations. Objectives and conditions for the creation of multinational corporations. Types of multinational corporations. Thematic definition of exercises: 1. 1. Introduction to financial management of a holding – practical starting points. Identification of holding structures in practice (national and transnational examples). Analysis of the reasons for the establishment of holdings and their strategic objectives. Comparison of the holding structure with other forms of business associations. Design of a simple organizational structure of a holding according to the assignment. Discussion of the advantages and disadvantages of large business groups. 2. Governance and management of a holding – legal and financial aspects. Practical application of legal forms of a holding (national vs. European). Calculation of direct and indirect ownership and voting shares. Case study of the dividend and reinvestment policy of a holding. Analysis of the competencies of the board of directors and statutory bodies in the group. Basic tasks in the field of business combinations (merger, fusion, division). 3. Business combinations and acquisitions – financial perspective. Typology of business combinations and their structure after implementation. Distinguishing between a subsidiary, associate and joint venture. Practical examples of decisive, joint and substantial influence. Financial aspects of structured acquisitions and post-acquisition management. Discussion on preparing a holding for exit from an investment. 4. Financial flows and treasury in a holding. Mapping of intragroup financial flows. Proposal of a model of a centralized treasury function. Examples of liquidity management and liquid reserves in a holding. Analysis of dividend, interest and license flows. Fundamentals of currency risk management on practical examples. 5. Transfer pricing - calculations and documentation. Identification of dependent persons and controlled transactions. Application of transfer pricing methods (CUP, TNMM, profit split). Residual analysis and comparability analysis on examples. Practical demonstration of the structure of transfer documentation. Transfer pricing risks from the perspective of tax control. 6. Consolidation and performance management of a holding. Determination of the obligation to prepare consolidated financial statements. Practical consolidation procedure (eliminations, goodwill, minority interests). Selection of an appropriate consolidation method according to the type of relationship. Calculations and interpretation of EVA, MVA, CF ROI, RONA, NPV indicators. Application of Balanced Scorecard and BI tools in holding performance management. 7. Tax planning in holding structures. Calculation of the effective tax rate in a holding group. Examples of using participation exemption and double taxation agreements. Optimization of withholding taxes within the group. Identification of risks of aggressive tax planning (GAAR, ATAD, CFC). Tax aspects of exit planning. 8. Financial analysis of a holding. Horizontal and vertical analysis of consolidated statements. Analysis of the capital and asset structure of a holding. Calculation and interpretation of ratio indicators. Analysis of intra-holding prices and interests. Rules of thin capitalization - practical examples. 9. Risk management in a holding. Identification of key risks in a holding group. Design of a financial, currency and interest rate risk management system. Practical use of hedging, insurance and central guarantees. Creation of a basic crisis scenario for a holding. 10. Capital structure and financing of a holding. Analysis of financing sources (internal vs. external). Calculation of the cost of capital (WACC) in a holding. Optimization of the equity to debt ratio. Practical cash pooling models (real, fictitious). Dividend policy and dividend recapitalization. 11. Financial planning and budgeting. Centralized vs. decentralized planning - comparison of approaches. Creation of financial plans of subsidiaries. Consolidation of financial plans of a holding. Capital structure and cash flow planning. Linking strategic and financial planning. 12. Economic substance of holding structures. Assessment of the real economic substance of model holdings. Identification of risks of shell companies. Impact of substance on tax benefits and financing. Evaluation of structures from the perspective of banks, investors and auditors. 13. Exit and succession planning. Financial comparison of exit forms (IPO, strategic sale, secondary buy-out). Preparing a holding for exit from the perspective of financial management. Scenarios of reinvestment vs. distribution of profits. Succession planning in family holdings. The role of professional management after exit.