Sum-Of-Parts Valuation

What is the 'Sum-Of-Parts Valuation'

The sum-of-parts valuation is valuing a company by determining what its divisions would be worth if it was broken up and spun off or acquired by another company.

BREAKING DOWN 'Sum-Of-Parts Valuation'

For example, you might hear that a young technology company is "worth more than the sum of its parts." This means that the value of the tech company's divisions could be worth more if they were sold to other companies. In most cases, larger companies have the ability to take advantage of synergies and economies of scale that are unavailable to smaller companies, enabling them to maximize a division's profitability and unlock unrealized value.

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