Risk and acquisitions
In this lesson, you'll learn how to adjust your valuation methods when acquisitions involve changes to risk. You'll explore how business risk and financial risk shift during takeovers, when to use a risk-adjusted WACC versus the adjusted present value method, and why these choices matter for accurate valuations.
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In this lesson
- 0:00 Risk and acquisitions overview
- 0:31 Adjusting discount rates for business risk
- 0:51 Adjusted present value for financial risk
- 1:17 Valuing high-growth start-ups challenges
- 2:32 Overvaluation risks and consequences
About this lesson
The video also covers the unique challenges of valuing high-growth start-ups—limited financial history, unconventional business models, and regulatory uncertainty—and explains how overvaluation occurs and why careful analysis is essential to avoid costly investment mistakes. This content is directly relevant to valuation topics across CIMA and ACCA qualifications, particularly when studying acquisition strategy and financial decision-making. Understanding how to adjust for risk ensures you can defend your valuations in case study scenarios and demonstrate the analytical rigour examiners expect.
Duration: 4m
Transcript
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