The Importance of a Company’s Breakup Value
Breakup value refers to how much a company would be worth after the components of the company were sold off and all of the its liabilities were paid. Usually the breakup value is derived by looking at each segment of the company independently to arrive at the resale value of each. A breakup value analysis might be conducted by investors looking at the acquisition of a corporation or by value investors in search of bargain stocks.
When performing a breakup value analysis, assets including land, buildings, cash, and equipment are included to arrive at the breakup or “private market value”. The board of directors of a corporation that has performed poorly might decide sell off the company to get something for it. Situations also come up where companies look only to sell off particular divisions that have under-performed.
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The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.
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