Module II· Sum-of-the-PartsIntermediate
Question
How do you choose segment-specific multiples in an SOTP?
Answer
Pure-play comps for each segment:
- Segment 1 (industrials): EV/EBITDA 8x — industrial pure-plays as comps.
- Segment 2 (software): EV/EBITDA 18x — SaaS pure-plays.
- Segment 3 (real estate): NAV-based.
Deep diveShow more details
Consequence
A diversified group trades at a lower group multiple than the weighted average of the segment multiples — because of the conglomerate discount. Method: pure-play median per segment, with a slight discount for 'captive supply' or segment size differences where needed.
Pitch tip
'Segment 1 valued at 8.5x EBITDA (industrial peer median), Segment 2 at 12x (software peer median); blended implied multiple 9.7x vs. trading 8.2x — 18% conglomerate discount.'