Sum of the parts as a valuation method

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A written summary of the session

This is a short summary of the webinar. For the full written update, see our Q2 2026 quarterly valuation update (opens in a new tab).

“Increasingly, we’re seeing platform companies. What we’re being faced with as valuers is not just single assets, it’s quite complex companies.”

Q2 2026 bond yields

Government and corporate bond yields in the UK, Germany and Australia moderated during the quarter, but the trend since the start of the year has been upward: UK gilt yields rose 33 basis points year to date, German yields 15 basis points and Australian yields 18 basis points. The US was the exception, with yields rising through the quarter as well as over the year. With a steep yield curve, the underlying cost of debt for infrastructure assets is now comfortably above 6 percent, even for low-risk assets.

Listed funds and M&A activity

Discounts to net asset value (NAV) on listed infrastructure and renewable energy funds narrowed slightly during the quarter, even though the underlying cost of debt had not improved. Part of the reason is a wider market move from pure yield assets towards growth and platform strategies. Persistent discounts to NAV continue to drive take-private activity, with further sale processes announced across the listed fund sector.

What sum of the parts is, and when it is used

A sum of the parts (SOTP) valuation values the economically distinct parts of a diversified business separately, then adds them up, instead of applying one blended discount rate and multiple to the whole. It is used more and more, both as a valuation method in its own right and as a cross-check to a consolidated valuation, as platform businesses spanning several sectors, countries or development stages become more common.

Building an SOTP means splitting the business into its parts and applying the right method to each. That is typically a DCF for operating and construction assets, and multiples for early-stage or development assets where cash flow forecasts are less reliable. The results are then added up and adjusted for holding company costs.

Premiums, discounts and the need for evidence

Adding up the parts is rarely the end of the analysis. A premium, or less often a discount, may be needed to reflect what a platform offers beyond its individual parts: operating and procurement synergies, diversification and development or growth options. Any adjustment needs evidence behind it. A premium is justified only where the benefit is not already in the cash flow forecasts and where there is evidence to support it, such as a real pipeline of identified opportunities.

A worked case study

The case study applies the approach to a renewable energy platform. Operating solar and wind assets are valued with a DCF, construction assets with a DCF and a construction risk premium, and near-term development assets with multiples, because a DCF is less reliable at that stage. After holding company costs and a risk-adjusted view of the growth pipeline, the total is cross-checked against market EV/EBITDA multiples and the implied blended discount rate.

“An SOTP is a methodology used to value economically distinct elements of a wider business. It’s increasingly becoming a key cross-check, and sometimes a primary method of valuation.”

Presenters

• Ben Morris (opens in a new tab), Partner, Valuations (Infrastructure and Energy), London
• Charlie Williams (opens in a new tab), Manager, Valuations (Infrastructure and Energy), London