Note on Sum-of-The-Parts Valuation

Posted: 20 May 2009

See all articles by Belen Villalonga

Belen Villalonga

New York University (NYU) - Leonard N. Stern School of Business

Date Written: February 13, 2009

Abstract

Most large companies operate in more than one business. Valuing a diversified company requires separate valuations for each of its businesses and for the corporate headquarters. This method of valuing a company by parts and then adding them up is known as Sum-Of-The-Parts (SOTP) valuation and is commonly used in practice by stock market analysts and companies themselves. However, it is rarely taught in MBA programs or broached in valuation textbooks. Yet the application of the method raises a number of challenges.

Suggested Citation

Villalonga, Belen, Note on Sum-of-The-Parts Valuation (February 13, 2009). HBS Note No. 209-105, Harvard Business School Finance Unit, Available at SSRN: https://ssrn.com/abstract=1407519

Belen Villalonga (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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