Sum-Of-Parts Valuation

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DEFINITION of 'Sum-Of-Parts Valuation'

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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    The two commonly used methods for doing a tax-free spinoff are either to distribute shares of the spinoff company to existing ... Read Full Answer >>
  3. What happens to the company stock if a subsidiary gets spun off?

    When a subsidiary gets spun off, the company's stock tends to drop. However, the investor in the stock does not lose any ... Read Full Answer >>
  4. What are some common cash-debt strategies that occur during a spinoff?

    Cash-debt strategies that are commonly used to in a spinoff to enable the parent company to monetize the spinoff are debt/equity ... Read Full Answer >>
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    In finance, divestiture is defined as a reduction of a company's assets as a result of asset closures or the selling of business ... Read Full Answer >>
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