Sum of Parts Model

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Sum of parts model is one of the financial model valuation processes in determining the value of the aggregate divisions of a company when it is being acquired by another company. The valuation provides a series of values for a company’s equity by aggregating the value of each business units and then arrives at a total enterprise value (TEV). The equity value is then calculated by adjusting the company's net debt and other non-operating assets and expenses.

Sum-of-parts valuation is also known as the break-up value analysis method because this model helps a company to understand its true value. For an example, we might have heard that a young technology company is "worth more than the sum of its parts," it is been said so because the value of the company's different units could be worth more if they were sold to other companies. In such situations, larger companies have the ability to take advantage of collaborations and economies of scale unavailable to smaller companies, allowing them to maximize a division's profitability and unlock unrealized value.

This model is a useful methodology to get a quick and complete overview of a company by providing a detailed break-up of each of the business unit and its contribution to cash flow, earnings and value.


Rajagiri Center for Business Studies Cochin, one of the top Management Institutions in the country offers you various post graduation courses like MBA, MHRM, PGDM etc.  Rated as one of the Best Business Schools in Kochi Kerala, Rajagiri promises you serene and improved learning facilities, well-experienced faculties, best hostel facilities and top placements to leading industries across the world. So if you are looking for Top B-School in Kochi Kerala, then RCBS is the perfect fit for you. 

To Know More   https://rcbs.rajagiri.edu/







Location: Kerala, India

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