Sum of Parts Model
Corporate Finance Financial Model (Free Excel Download)
Value diversified businesses by segment using standalone forecasts, peer multiples, DCF inputs, holding-company adjustments, and a consolidated equity value bridge.
professionals from Deloitte
Used by professionals from
About this model
Value a diversified multi-segment conglomerate by valuing each business segment independently using DCF or trading multiples, then applying a conglomerate discount to account for inefficient capital allocation. Segment-level revenue, EBITDA, and margins are projected separately with segment-specific valuation multiples (EV/EBITDA, P/E) or individual DCF models. Holding company overhead is allocated to segments; the sum of segment values less corporate costs produces enterprise value.
The workbook builds a segment detail tab for each major business unit, aggregates into a Summary Valuation sheet, and produces a per-share bridge showing how each segment contributes to total equity value. Conglomerate discount (typically 10–30% in practice) is applied as either a fixed percentage or a dynamic WACC adjustment. Terminal values are stressed across multiple exit multiples to show valuation sensitivity.
This approach reveals which segments are value-accretive and identifies candidates for divestiture. Typical diversified companies (conglomerates, industrial multi-divisions) trade at a 15–25% discount to sum-of-parts due to capital misallocation and complexity discount.
What every model includes
Live formulas, no hardcoded values
Outputs are driven by live formulas, so the workbook updates from its assumptions instead of relying on hardcoded results.
All assumptions in one tab
Inputs are clearly marked in the Assumptions tab and separated from calculations, making it clear what to change and what to leave intact.
Statements always balancing
For integrated-statement models, the balance sheet, cash flow, and supporting schedules tie through properly.
Distinct schedules for clarity
Debt, working capital, taxes, and cash flow can get messy quickly. We group calculations in clear schedules, not across disconnected tabs.
No hidden macros or external links
There are no unexplained external workbook links or macros to undermine auditability or portability.
Changes flow through the model
Update a key driver and see the impact carry through the forecast, financing, and return outputs. We never use hardcoded numbers in formulas.
What's inside the Sum of Parts Model
- Up to five independent business segment valuations
- Multiple-based and DCF-based segment valuation options
- Corporate overhead and tax allocation logic
- Equity value bridge covering minority interests, JVs, and pension liabilities
- Conglomerate discount sensitivity analysis
- Segment-level revenue, EBITDA, and margin assumptions
- Segment-specific valuation multiples (EV/EBITDA, P/E) or DCF models
- Holding company cost allocation and overhead allocation
Sum of Parts Model: Segment Valuation and Equity Bridge Explained
This sum of parts model values a diversified group by projecting five reporting segments, valuing each with three methods, and bridging to a per-share equity value after a conglomerate discount. It shows where segment-specific capital costs and corporate adjustments shape the result.
How segment-level operating drivers shape the valuation
The group is split into five reporting segments, each with its own revenue history and five-year growth path. Margins, D&A, capital expenditure intensity and working-capital needs are set per segment, so the forecast reflects different business economics rather than a single blended average.
- Crucially, each segment carries its own WACC and terminal growth rate, because a sum-of-the-parts premise is that segments do not share a cost of capital. A corporate overhead line is capitalised as a perpetuity at the value-weighted average of those segment WACCs, not a simple mean.
- These drivers flow directly into each valuation method.
Calculation flow: three valuation methods and the common equity bridge
Every segment is projected from three historical years into a five-year forecast, then valued three ways. The EV/EBITDA method applies low, mid and high peer multiples to forward segment EBITDA.
- The DCF uses segment unlevered free cash flow, mid-year discounting and a normalised terminal year with segment-specific WACC and terminal growth. The P/E method taxes segment EBIT after allocated interest and applies peer P/E multiples.
- All three then pass through the same equity bridge: less corporate overhead, net debt, minorities, plus associates. A conglomerate discount is applied at the equity level so the per-share outputs are like-for-like.
The P/E bridge does not subtract net debt because its multiple already charges allocated interest.
Outputs: dashboard, football field and sensitivity views
The model produces a dashboard with KPI cards, a segment valuation summary, equity value by method, trend charts and a waterfall from segment enterprise value to equity value. A summary sheet presents segment valuation by method, a football field chart and implied range.
- Sensitivity analysis explores the conglomerate discount against a multiple factor, an illustrative growth and margin grid, and a scenario summary. The football field lays the three per-share outputs against the current trading price, making it easy to see the range.
- All outputs are linked to the same underlying assumptions, so changes in segment drivers or corporate items flow through consistently.
Practical use for evaluating diversified companies and hidden value
This model is useful for anyone assessing whether a diversified group is worth more than the sum of its parts. By valuing each segment separately and then applying a conglomerate discount, it highlights potential hidden value or divestiture opportunities.
- The scenario toggle allows users to switch between bear, base and bull cases with different growth and multiple assumptions, supporting a range-based view. The football field output helps compare the implied value range with the current share price.
- However, the public download is a values-only preview, not a live formula workbook, so it serves as a structured reference rather than a real-time tool. The model clearly documents its assumptions and scope.
Formatted to IB standards
Named theme colors repaint the whole workbook in one click, on top of an investment-banking structure with clear input, output, and cross-sheet reference styling - brand-ready, institutional-grade, and fully auditable.
Created by ex-finance professionals
Hey, I’m Alex and I created Finamodel.
Over my years in the finance industry I kept building the same models over and over again. Same structure, same assumptions, different logo. So I started building frameworks to turn them into clean, reusable templates.
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Frequently asked
What is a sum-of-the-parts model?+
It is a valuation framework that values each business segment of a diversified company independently, then aggregates the results and adjusts for corporate-level items to arrive at total equity value.
Who uses SOTP models?+
Equity research analysts, corporate development teams, activist investors, and M&A advisers use them when a company operates across materially different industries or growth profiles.
What should an SOTP model include?+
It should include independent segment valuations, corporate overhead allocation, inter-segment eliminations, and an equity value bridge covering non-operating items.
Can I value segments using different methods?+
Yes. The model supports linking segment valuations to separate DCF analysis for high-growth divisions alongside multiple-based valuations for mature segments.
How does it handle the conglomerate discount?+
The model includes sensitivity analysis for applying a conglomerate discount, reflecting the market tendency to value diversified firms below the sum of their standalone parts.
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