Breakup Value


DEFINITION of 'Breakup Value'

The sum-of-parts value of a publicly traded company. This value is derived by analyzing each business segment of a company independently. This is usually applied to large cap stocks that are likely to operate in several different markets or industries. A breakup value analysis may be brought about by investors if the market cap of the stock is less than the breakup value for a prolonged period of time.

BREAKING DOWN 'Breakup Value'

If a company is performing poorly, or the stock has not kept up to the perceived level of "full value", investors may call for the company to be split apart, with proceeds returned to investors as cash, stock in spun-off companies, or a combination of both.

Investors can also calculate a breakup value on a perfectly healthy company as a way to determine a potential floor for the stock, or a potential entry point for a prospective buyer. In order to accurately calculate a company's breakup value, detailed data is needed on the revenue, earnings and cash flows for each distinct operating unit of the company. From there, relative valuations based on publicly-traded industry peers can help to derive a value for the segment as a spun off stock.

  1. Revenue

    The amount of money that a company actually receives during a ...
  2. Acquisition

    A corporate action in which a company buys most, if not all, ...
  3. Discontinued Operations

    A segment of a company's business that has been sold, disposed ...
  4. Sum-Of-Parts Valuation

    Valuing a company by determining what its divisions would be ...
  5. Break Fee

    1. A fee paid by a target company to bidders (during an acquisition) ...
  6. Spinoff

    The creation of an independent company through the sale or distribution ...
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