Sum of the Parts Valuation in Excel

Valuation · Updated June 2026

Sum of the parts valuation, often called SOTP, values a diversified company by appraising each business segment separately and adding the pieces. A single blended multiple hides the fact that a high-growth software unit and a slow industrial unit deserve different multiples. SOTP gives each segment the multiple its own peers trade at, then bridges from enterprise value to equity value.

The concept and the bridge

For each segment you compute an enterprise value, usually as EV = Segment EBITDA * Peer Multiple. You then add the segment enterprise values to get total enterprise value, and bridge to equity: Equity Value = Total EV - Net Debt, where Net Debt = Total Debt - Cash.

Investors often apply a conglomerate discount, a reduction of perhaps 5 to 15 percent, because diversified groups historically trade below the sum of their standalone parts. The discount reflects capital-allocation frictions and reduced transparency, and it is a judgment, not a formula.

Worked example

A group has three segments. Software EBITDA is 100 at a 15x multiple, industrial EBITDA is 200 at a 7x multiple, and services EBITDA is 50 at a 9x multiple. Net debt is 600 and a 10 percent conglomerate discount applies.

Software EV: =100*15 returns 1500.
Industrial EV: =200*7 returns 1400.
Services EV: =50*9 returns 450.
Total EV: =1500+1400+450 returns 3350.
Equity value: =3350-600 returns 2750.
After 10 percent discount: =2750*(1-0.10) returns 2475.

Segment	EBITDA	Multiple	EV
Software	100	15x	1500
Industrial	200	7x	1400
Services	50	9x	450
Total EV	350		3350
Equity after discount			2475

=(3350-600)*(1-0.10) returns 2475.

Laying it out in a model

Structure SOTP as one row per segment with EBITDA and multiple as separate inputs, so each peer multiple is visible and defensible.

One row per segment, with EBITDA and multiple in their own cells.
Sum the segment enterprise values into a single total EV cell.
Put net debt and the conglomerate discount in clearly labeled bridge rows.
Source each multiple from a comps tab so reviewers can see where 15x came from.

Pitfalls

The biggest trap is typing a peer multiple directly inside the EV formula, like =100*15. Six months later nobody remembers whether 15x came from a comps set or a guess. Keep every multiple in its own input cell linked to a source.

Subtracting net debt twice, or forgetting unallocated corporate costs and minority interests, breaks the bridge. Account for central overhead, pension deficits, and any stake you do not fully own. Finally, do not double count: if a segment multiple is already EV/EBITDA, the segment value is an enterprise value, so net debt is subtracted once at the group level, not per segment.

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Find Hardcodes flags a peer multiple typed inside a segment formula so every multiple stays in its own sourced input cell.

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FAQ

Why value a company by segments instead of one multiple?

Because segments have different growth, margins, and risk, and peers trade at different multiples. A blended multiple over-values the slow units and under-values the fast ones. SOTP gives each segment the multiple its own comparable set commands.

What is a conglomerate discount?

A reduction applied to the summed segment values because diversified groups often trade below the sum of their parts. It reflects capital-allocation frictions and lower transparency, typically 5 to 15 percent, and it is a judgment call rather than a calculated figure.

Do I subtract net debt for each segment or once?

Once, at the group level, when your segment values are enterprise values. Add the segment enterprise values to a total EV, then subtract group net debt to reach equity value. Subtracting per segment would double count the debt.