Skip to content
Felix
  • Topics
    • My List
    • Felix Guide
    • Asset Management
    • Coding and Data Analysis
      • Data Analysis and Visualization
      • Financial Data Tools
      • Python
      • SQL
    • Credit
      • Credit Analysis
      • Restructuring
    • Financial Literacy Essentials
      • Financial Data Tools
      • Financial Math
      • Foundations of Accounting
    • Industry Specific
      • Banks
      • Chemicals
      • Consumer
      • ESG
      • Insurance
      • Oil and Gas
      • Pharmaceuticals
      • Project Finance
      • Real Estate
      • Renewable Energy
      • Technology
      • Telecoms
    • Introductory Courses
    • Investment Banking
      • Accounting
      • Financial Modeling
      • M&A and Divestitures
      • Private Debt
      • Private Equity
      • Valuation
      • Venture Capital
    • Markets
      • Economics
      • Equity Markets and Derivatives
      • Fixed Income and Derivatives
      • Introduction to Markets
      • Options and Structured Products
      • Other Capital Markets
      • Securities Services
    • Microsoft Office
      • Excel
      • PowerPoint
      • Word & Outlook
    • Professional Skills
      • Career Development
      • Expert Interviews
      • Interview Skills
    • Risk Management
    • Transaction Banking
    • Felix Live
  • Pathways
    • Investment Banking
    • Asset Management
    • Equity Research
    • Sales and Trading
    • Commercial Banking
    • Engineering
    • Operations
    • Private Equity
    • Credit Analysis
    • Restructuring
    • Venture Capital
    • CFA Institute
  • Certified Courses
  • Ask An Instructor
  • Support
  • Log in
  • Topics
    • My List
    • Felix Guide
    • Asset Management
    • Coding and Data Analysis
      • Data Analysis and Visualization
      • Financial Data Tools
      • Python
      • SQL
    • Credit
      • Credit Analysis
      • Restructuring
    • Financial Literacy Essentials
      • Financial Data Tools
      • Financial Math
      • Foundations of Accounting
    • Industry Specific
      • Banks
      • Chemicals
      • Consumer
      • ESG
      • Insurance
      • Oil and Gas
      • Pharmaceuticals
      • Project Finance
      • Real Estate
      • Renewable Energy
      • Technology
      • Telecoms
    • Introductory Courses
    • Investment Banking
      • Accounting
      • Financial Modeling
      • M&A and Divestitures
      • Private Debt
      • Private Equity
      • Valuation
      • Venture Capital
    • Markets
      • Economics
      • Equity Markets and Derivatives
      • Fixed Income and Derivatives
      • Introduction to Markets
      • Options and Structured Products
      • Other Capital Markets
      • Securities Services
    • Microsoft Office
      • Excel
      • PowerPoint
      • Word & Outlook
    • Professional Skills
      • Career Development
      • Expert Interviews
      • Interview Skills
    • Risk Management
    • Transaction Banking
    • Felix Live
  • Pathways
    • Investment Banking
    • Asset Management
    • Equity Research
    • Sales and Trading
    • Commercial Banking
    • Engineering
    • Operations
    • Private Equity
    • Credit Analysis
    • Restructuring
    • Venture Capital
    • CFA Institute
  • Certified Courses
Felix
  • Data
    • Company Analytics
    • My Filing Annotations
    • Market & Industry Data
    • United States
    • Relative Valuation
    • Discount Rate
    • Building Forecasts
    • Capital Structure Analysis
    • Europe
    • Relative Valuation
    • Discount Rate
    • Building Forecasts
    • Capital Structure Analysis
  • Models
  • Account
    • Edit my profile
    • My List
    • Restart Homepage Tour
    • Restart Company Analytics Tour
    • Restart Filings Tour
  • Log in
  • Ask An Instructor
    • Email Our Experts
    • Felix User Guide
    • Contact Support

Advanced Valuation Techniques

This session covers the more advanced techniques used in relative and fundamental valuation. This includes the value driver for terminal value, discounting with a variable valuation date, the extended WACC formula, and sum of the parts valuation.

Unlock Your Certificate   
 
0% Complete

11 Lessons (35m)

Show lesson playlist
  • Description & Objectives

  • 1. Value Driver Formula

    03:45
  • 2. Value Driver Formula Workout

    03:27
  • 3. Discounting with Variable Valuation Date

    04:08
  • 4. Discounting with Variable Valuation Date Workout

    04:58
  • 5. Extended WACC Formula

    03:10
  • 6. Extended WACC Formula Workout

    03:42
  • 7. Sum of the Parts Valuation

    03:23
  • 8. Sum of the Parts Valuation Workout

    02:47
  • 9. Sum of the Parts with Finance Operations

    01:52
  • 10. Sum of the Parts with Finance Operations Workout

    04:09
  • 11. Advanced Valuation Techniques Tryout


Prev: DCF Valuation Next: Pulling The Analysis Together

Sum of the Parts Valuation

  • Notes
  • Questions
  • Transcript
  • 03:23

What is sum of the parts valuation?

Downloads

No associated resources to download.

Glossary

conglomerate valuation SOTP Sum of the parts
Back to top
Financial Edge Training

© Financial Edge Training 2025

Topics
Introduction to Finance Accounting Financial Modeling Valuation M&A and Divestitures Private Equity
Venture Capital Project Finance Credit Analysis Transaction Banking Restructuring Capital Markets
Asset Management Risk Management Economics Data Science and System
Request New Content
System Account User Guide Privacy Policy Terms & Conditions Log in
Transcript

Sum of the parts valuation. Large mature companies often have very diverse operations with quite distinct business segments, and we refer to these as conglomerates. However, this diversity can cause problems for valuation as we need to determine the appropriate valuation multiple to value a company, or if we're using DCF, we need to determine the appropriate cost of capital. Here's an example of a well-known conglomerate, that's Walt Disney Company, which has major operations in the broadcasting and cable business. It has a theme park business, and it also has a large content and movie production business. Now these are really different businesses with very different growth expectations, different capital intensities, and very different risk profiles. So if we wanted to value Walt Disney using valuation multiple, which multiple should we use? Now, if we look at other broadcasters, we see that they currently trade on EV/EBITDA multiples around 20 times. If we look at other theme park operators, we see that they currently trade on an EV/EBITDA multiple of around 15 times. And if we look at other content and movie production companies, we see that they currently trade on an EV/EBITDA multiple of around 12 times. But which multiples should we use if we want to value Walt Disney? Now, exactly the same question will arise if instead we want to use DCF valuation, and we want to determine the cost of capital of the Walt Disney operations, since the different parts of the business have very different risks. Now sum of the parts valuation is the technique that we use to address this issue. And as the name suggests, we value each segment separately using an appropriate valuation technique or valuation multiple for that segment, and then we add them together to give the total EV of the business. Once we have the total EV, we can then walk over the EV bridge in the usual way to derive equity value. One thing to note is that sometimes we need to adjust the EV to include a conglomerate premium or discount if the diversification of the business creates or destroy synergies. For example, it could be that by having very diverse operations, this creates distractions for management, and therefore destroys value. Or it could be that there are strategic benefits from combining these diverse operations which are not captured in the segment multiples. However, the question of what premium or discount to use is not easy to answer. If the business hasn't undergone any major changes in recent years, typically analysts will look at the historic valuation of the combined business versus the sum of the parts to identify the historic premium or discount, and then will continue to apply that same premium or discount perspectively. Although we've focused here on sum of the part valuation using multiples, the same principles can be applied when using sum of the parts in DCF valuation, or more commonly to mix up the approach, so that DCF is used for some segments whilst multiples are used for others. This is particularly helpful if one segment lacks comparable peers, so DCF valuation is the only viable technique. However, where DCF is used, an appropriate cost of capital is gonna be needed for that segment rather than for the business as a whole. So typically the cost of capital will be estimated using the capital structure of peer companies since we don't usually have sufficient information to calculate the current capital structure of the business segment.

Content Requests and Questions

You are trying to access premium learning content.

Discover our full catalogue and purchase a course Access all courses with our premium plans or log in to your account
Help

You need an account to contact support.

Create a free account or log in to an existing one

Sorry, you don't have access to that yet!

You are trying to access premium learning content.

Discover our full catalogue and purchase a course Access all courses with our premium plans or log in to your account

You have reached the limit of annotations (10) under our premium subscription. Upgrade to unlock unlimited annotations.

Find out more about our premium plan

You are trying to access content that requires a free account. Sign up or login in seconds!

Create a free account or log in to an existing one

You are trying to access content that requires a premium plan.

Find out more about our premium plan or log in to your account

Only US listed companies are available under our Free and Boost plans. Upgrade to Pro to access over 7,000 global companies across the US, UK, Canada, France, Italy, Germany, Hong Kong and more.

Find out more about our premium plan or log in to your account

A pro account is required for the Excel Add In

Find out more about our premium plan

Congratulations on completing

This field is hidden when viewing the form
Name(Required)
This field is hidden when viewing the form
Rate this course out of 5, where 5 is excellent and 1 is terrible.
Were the stated learning objectives met?(Required)
Were the stated prerequisite requirements appropriate and sufficient?(Required)
Were the program materials, including the qualified assessment, relevant and did they contribute to the achievement of the learning objectives?(Required)
Was the time allotted to the learning activity appropriate?(Required)
Are you happy for us to use your feedback and details in future marketing?(Required)

Thank you for already submitting feedback for this course.

CPE

What is CPE?

CPE stands for Continuing Professional Education, by completing learning activities you earn CPE credits to retain your professional credentials. CPE is required for Certified Public Accountants (CPAs). Financial Edge Training is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors.

What are CPE credits?

For self study programs, 1 CPE credit is awarded for every 50 minutes of elearning content, this includes videos, workouts, tryouts, and exams.

CPE Exams

You must complete the CPE exam within 1 year of accessing a related playlist or course to earn CPE credits. To see how long you have left to complete a CPE exam, hover over the locked CPE credits button.

What if I'm not collecting CPE credits?

CPE exams do not count towards your FE certification. You do not need to complete the CPE exam if you are not collecting CPE credits, but you might find it useful for your own revision.


Further Help
  • Felix How to Guide walks you through the key functions and tools of the learning platform.
  • Playlists & Tryouts: Playlists are a collection of videos that teach you a specific skill and are tested with a tryout at the end. A tryout is a quiz that tests your knowledge and understanding of what you have just learned.
  • Exam: If you are collecting CPE points you must pass the relevant CPE exam within 1 year to receive credits.
  • Glossary: A glossary can be found below each video and provides definitions and explanations for terms and concepts. They are organized alphabetically to make it easy for you to find the term you need.
  • Search function: Use the Felix search function on the homepage to find content related to what you want to learn. Find related video content, lessons, and questions people have asked on the topic.
  • Closed Captions & Transcript: Closed captions and transcripts are available on videos. The video transcript can be found next to the closed captions in the video player. The transcript feature allows you to read the transcript of the video and search for key terms within the transcript.
  • Questions: If you have questions about the course content, you will find a section called Ask a Question underneath each video where you can submit questions to our expert instructor team.