tMega Members Meet to Discuss Capital Structure and Allocation
Treasurers at the world’s largest companies kick off their meeting tonight with dinner and then dive into capital structure and allocation decisions tomorrow at host Gilead Sciences in Foster City, CA.
US tax reform has prompted US multinational corporations to revisit capital allocation and investment decision-making. How are capital allocation decisions made at corporates and how has this been influenced by tax reform and market conditions? Are there any potential unintended consequences of different evaluation frameworks? Members will delve into whether beyond the initial decision-making process, they will have to test their capital allocation decisions to see if they are effective or ineffective after an outlay of funds.
Some of the questions members will look to answer include:
- How do companies prioritize capital allocation between growth investment, return of capital, and improving balance sheet, and what are the strategic and capital market implications?
- On what basis are internal and external investment decisions made (e.g., variants of NPV, IRR, ROIC, etc.) and how are appropriate hurdle rates for different jurisdictions set and managed over time?
- How should these change with tax reform and market conditions, and how can the choice of evaluation framework and/or hurdle rate impact strategic decision-making?
Members will also get an update on US rules and IRS regulations. They’ll hear expert commentary on the key elements of US tax law changes and related changes in IRS regulation that treasurers need to understand. They hope to clarify what new regs and interpretations have emerged since the group last met in the spring and how they may affect US-based multinational companies reviewing their available cash, capital structures, and general tax planning. They will also seek to know what companies are doing now and what they should be thinking about in the next six to 12 months.