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so, we know there are 3 types of acquisitions.
but how do we decide the type in a scenario?
regards
It depends whether or not the business risk changes, or the level of gearing changes, or both of them 🙂
(Don’t worry about learning the numbers themselves – type 1, type 2, etc. – but you do need to be able to do the relevant calculations depending on which is happening.)
ok…i know u will kill me…. but how do we know the business or the financial risk is changing?
the only thing i can think of is that if the gearing changes, then that will affect the financial risk.
but how do we determine a change in the business risk??
Financial risk changes if the gearing changes.
Business risk changes if the new investment (or the company being acquired) is in a different type of business.
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