Because industrial products are often very expensive many industrial companies offer finance regularly to their customers where this is the case. The financial reports may include segmental reporting that allows us to analyze this part of the business as if it were a bank. This is helpful because we can use bank valuation techniques to find the value of the financial services segment. For example, using a PE ratio, we can then use a sum-of-the-parts approach to separately value the industrials business. For example, using an EV/EBIT ratio.

As a very simple example here, if we applied a 10 times EV/EBIT to industrials, it would have an EV of 110. If we applied a 5 times PE ratio to financial services, its equity would have value of 10. To create an overall business wide valuation care needs to be taken in moving between equity and enterprise values.

If we follow on from our earlier example, we take the valuation in the sum-of-the-parts 110 enterprise value for the industrial operation and 10 equity value for the financial services segment. To then cross the bridge, we'd need to deduct the 3 of borrowings from the enterprise value of the industrials operations segment to get to an equity value of 107. This could then be added to the equity value of the financial services segment to give an overall equity for both segments of 117, which is the 107 plus the 10. This approach is called some of the parts and can create a more accurate view of the value of a conglomerate or a set of diverse operations, such as we're seeing here in an industrials company, which offers finance to its customers.