Module II· Special Situations ValuationIntermediate

Question

How do you value a holding company versus a pure operating company?

Answer

HoldCo valuation via sum-of-the-parts (SOTP):

Value each subsidiary/stake separately — DCF, trading comps, or market value if listed.
Sum to a 'gross asset value' (GAV).
Apply a holding discount — typically 15–25%, reflecting: (a) HoldCo overheads, (b) tax leakage on upstreamed dividends, (c) investor preference for 'pure plays'.
Subtract HoldCo net debt. Examples: diversified listed holdings and family-controlled holding structures. Calibrate the holding discount: check the holding's average historical discount versus its SOTP value.

Deep diveShow more details

Pitch tip

'The holding discount is persistent — Berkshire Hathaway ~5%, continental-European holdings 20–30%. The market loves simple business models.'

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