SOTP
Business & Finance abbreviation · Finance
| Stands for | Sum of the parts |
|---|---|
| Categories | Business & Finance |
SOTP stands for Sum of the parts, a finance abbreviation.
Valuation approach that values each business segment of a company separately, often using different multiples or DCFs, then adds them together and subtracts net debt. It suits conglomerates and supports arguments that a company is worth more broken up.
Example: Our SOTP values the cloud unit at $90 billion on its own, more than the whole group's market cap.
Usage notes
When the SOTP value exceeds the market value, the gap is called a conglomerate discount, a common argument used by activist investors pushing for spin-offs. Also known as breakup value analysis.
Related abbreviations
More finance abbreviations
- ROI – Return on investment
- ROIC – Return on invested capital
- ROS – Return on sales
- RRR – Required rate of return
- S&T – Sales and trading
- SAFE – Simple agreement for future equity
- SPA – Share purchase agreement
- SPV – Special purpose vehicle
- TLB – Term loan B
- TSR – Total shareholder return
- TTM – Trailing twelve months
- TVM – Time value of money