sum of parts theory

The sum of parts theory suggests that a company's total value can be understood by assessing the value of its individual divisions or assets separately, then adding these figures together. This approach recognizes that different parts of the company may perform differently or have unique value, and by valuing them separately, investors or analysts can gain a clearer picture of the company's overall worth. It’s useful for identifying undervalued segments or considering mergers and acquisitions, as it highlights the potential value that might not be apparent from the company's combined market price.