Explanation

Just like DCF, economic value, replacement value, breakup value analysis, also known as sum-of-the-parts (SOTP) analysis, is another method of valuation often used in valuing a multidivisional company, holding company, or a conglomerate. Each part/division/subsidiary is individually valued. If the total sum is higher than the company's current value as a whole, the company is a good target for a merger.

Verified Answer

The value of the individual parts/subsidiaries/divisions of a company if they are sold individually