November 2021 | 

Wharton Finance: Education for Everyone

Wharton Finance: Education for Everyone

Since 1881, when Wharton was founded as the first collegiate business school, its emphasis was on finance. The school is now home to renowned management, marketing, and legal studies departments, and more than a dozen research centers address critical business challenges in partnership with industry and governments. But even as its MBA program is ranked at the top worldwide, its reputation as “the finance school” holds.

That doesn’t mean, though, that the Finance department is resting on its laurels. Faculty continue to develop new courses that explore innovation in finance and entrepreneurship, focusing on of-the-moment subjects like shareholder activism and fintech.

The breadth and depth of MBA offerings is mirrored in Wharton’s Executive Education programs, which range from financial basics to the highest levels of professional development and are taught by the same faculty. As professor Michael Roberts says, “What’s special about Wharton finance is the emphasis on rigor and quantitative, objective analysis that we are known for in combination with practical application. Everything we do has a reason, and that reason stems from the problems executives face every day.”

Learning to Speak the Language of Business

Can you read a financial statement, or are you like many leaders who simply rely on others to explain the numbers? Wharton Accounting Professor Richard Lambert says to be a more effective manager and bring greater value to your organization, “you can’t just leave finance and accounting to the professionals. It should pervade all parts of the organization. If you can think and express yourself in financial terms, you can engage in financial discussions, dive deeper into your company’s performance, and make a more meaningful contribution.”

Lambert, a leading authority on financial reporting as well as cost and management accounting and author of the book Financial Literacy for Managers, helps participants achieve those goals as director of Finance and Accounting for the Non-Financial Manager. “Our program is pitched to marry the new skills that we will develop to the experience you already have in terms of experience, knowledge, and operational talent. Together, they are what really adds value.”

Accounting professor and Vice Dean of Wharton’s MBA Program for Executives Peggy Bishop Lane also teaches in the program. She says learning how to perform key calculations is an important distinction that sets it apart. “You don’t just leave with an understanding of the numbers provided by others. You learn how to calculate net present value, value income and payments, and evaluate projects based on cost and revenue implications.”

Because of the amount of material covered, and participants’ initial lack of familiarity with it, the program includes nightly review sessions led by Lane. “The extra sessions are designed to help those who feel less comfortable with the material,” she says. “They give you more time to think about and really understand the concepts. Sometimes to absorb the information you need to hear it more than once, or in a slightly different way; that’s when a light bulb can go on. The goal is to equip participants to read financial reports and know what the numbers are telling them. It helps them engage in discussions and decisions in a more meaningful way.”

Creating Value through Mergers and Acquisitions

The executives who attend Mergers and Acquisitions, one of Wharton Executive Education’s longest-running programs, have a basic knowledge of accounting that includes familiarity with balance sheets, income and cash flow statements, and finance. The business development officers, CFOs and executive directors of finance, senior business analysts, division and unit heads, and lawyers come to the program to learn a disciplined approach to one of the most popular methods of corporate growth (even though it has a failure rate estimated at well over 50 percent).

Wharton finance faculty explore the common and not-so-common reasons why mergers don’t succeed in creating value for acquiring companies. “We spend a lot of time talking about how interrelated activities like valuation, strategy, integration, and due diligence are involved in managing an M&A transaction,” says program director and professor Robert Holthausen. “Companies that succeed in their M&A efforts have a holistic process that doesn’t treat different teams like separate silos. They communicate well across all groups and facets of the deal, sharing strategy, progress, and findings.”

“If their efforts aren’t integrated,” Holthausen continues, “it can be a disaster even if they got a good price. Someone from operations, for example, might not even be involved until the day the deal is closed. I’ve seen deals that made sense — the company paid the right price based on the value the merger represented to them. But they didn’t run the integration right, and they never realized the benefits they thought they were going to get.”

Participants in this program gain hands-on experience in successfully navigating a transaction in a series of simulations. Working in small groups, they put new knowledge to the test, dealing with a wide range of issues that includes valuation, taxation, due diligence, and anti-trust questions. “Mergers are a complex process, with incredible risks,” notes Holthausen. “A failure to understand the current M&A marketplace and best practices can destroy value. But having the right knowledge and the right tools can set you up for success.”

Acquiring Higher-Level Financial Skills

Other Wharton Executive Education finance programs offer deep dives into specific financial skills, principles, or sectors, attracting senior leaders and entrepreneurs who seek to learn from the school’s trusted, world-renowned experts. Corporate Valuation, for example, focuses on the needs of those responsible for acquisition, mergers, buyouts, divestitures, restructuring, budgeting, and planning. Participants are already familiar with concepts including net present value (NPV), internal rate of return (IRR), free cash flow, discounted cash flow analysis, return on investment, and cost of capital.

Bill Fink, an executive vice president at TD Bank, came to the program with an MBA and nearly three decades of experience in banking and finance. He attended while completing the Advanced Finance Program, which includes six individual open-enrollment programs. Fink appreciates the emphasis on “learning by doing,” which includes engaging in valuations across a range of situations and for multiple purposes. “Putting the principles into action, fingers to the keyboard, and driving the process to its conclusion made the discussions in class far more meaningful,” he says.

Corporate Valuation provides “an objective framework for understanding the financial implications of large-scale strategic operating and financing decisions,” says academic director Michael Roberts. It covers valuation tools, frameworks, and models that apply to any entity and setting, including highly leveraged transactions, mergers and acquisitions, and cross-border valuations.

CEO Rogério Gonçalves says he is now applying lessons from Roberts to every potential acquisition target and is “getting very different results. We had an automotive target recently where using [Roberts’] more accurate valuation method enabled us to get a sales price 20 percent lower than what we would have done otherwise. We concluded the deal at that price. In the first year [after attending Corporate Valuation], we already got a major return on investment.”