In the Sum-of-the-Parts analysis, you evaluate each division of an organization using distinct comparable and transactions, obtain distinct multiples, and then sum up the values of each division to determine the overall value of the organization.
For example, we have a manufacturing division with an EBITDA of $200 million, an entertainment division with an EBITDA of $200 million, and a consumer goods division with an EBITDA of $150 million.
The median multiples for each division are 5x EBITDA for manufacturing, 8x EBITDA for entertainment, and 4x EBITDA for consumer goods. We have chosen comparable companies and deals for each division.
For our calculation, the total value of the company would be $2.4 billion ($200 * 5x + $100 * 8x + $150 * 4x).