Sum-of-the-Parts

Value each segment on its own multiple, take off head office costs and net debt, compare the result with the price, then sell or spin off one segment.

Learning focus: A group can trade below the sum of its parts for lasting reasons, and the gap turns on where its capital goes as much as on what its segments earn.

Case file

Company

Scenario

Required return

Terminal growth

The sum uses the latest year's actuals. The scenario only sets the default tax and interest rates.

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1. Segments

This company reports no segments. Type up to four of your own below.

Segment 1 name

Segment 1 EBIT

Segment 1 EV/EBIT

Segment 2 name

Segment 2 EBIT

Segment 2 EV/EBIT

Segment 3 name

Segment 3 EBIT

Segment 3 EV/EBIT

Segment 4 name

Segment 4 EBIT

Segment 4 EV/EBIT

2. Head office costs

Capitalize and deduct

Head office cost

Head office multiple

3. Restructuring

Sale

Sale EV/EBIT

Tax rate on the gain

Tax basis

Use of proceeds

Interest rate on debt

Yield on cash

Spin-off

Stranded head office cost

Sum of the parts

Segments

None on file

Type up to four

Y10 group EBIT

$375.7m

Net debt

$879.2m

Ostrell Industries reports no segments, so there is nothing on file to sum. Type up to four segments, each with a name, an EBIT and a multiple.