“Breaking apart a conglomerate, segment-level multiples”
As a financial analyst, you're asked in an interview: "Walk me through how you would value a diversified conglomerate using a sum-of-the-parts (SOTP) approach — how do you break the business into segments, value each one against the right peer multiple, and combine the pieces into a single valuation?" Walk through how you'd answer that question, using segment-level financials for a three-division conglomerate to build an implied valuation.
Task: build an implied Equity Value for the conglomerate by valuing each business segment separately against a segment-appropriate peer multiple, combining the segment values into a total Enterprise Value, and bridging that down to per-share Equity Value.
The conglomerate reports three operating segments plus unallocated corporate costs that sit above the segments.
| Segment | 2024 EBITDA ($m) | Peer EV/EBITDA Multiple |
|---|---|---|
| Industrial Products | 180 | 7.0x |
| Software | 90 | 14.0x |
| Consumer Goods | 60 | 9.0x |
| Corporate / Unallocated | (20) | 7.0x |
Segment EV = Segment EBITDA × Peer EV/EBITDA Multiple
Using this formula, compute the Enterprise Value for each segment, including the corporate line.
Total EV = Sum of all Segment EVs (including Corporate / Unallocated)
Using this formula, combine the four segment values into a single sum-of-the-parts Enterprise Value.
Equity Value = Total EV - Net Debt - Minority Interest
Assume:
Using these inputs, compute total Equity Value and the implied value per share.
Try answering out loud first — then reveal the model answer and compare.
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