Overview

 This joint venture waterfall distribution is designed for cash flow entries at the top, and the defined split at each hurdle. All logic flows from that and it is very easy to explain to anyone. The model was built to track up for up to 10 years. The hurdles are also very simple: 

  • Hurdle 1: Repay All Equity
  • Hurdle 2: Defined Equity Multiple

Cash splits can be defined up until each hurdle is met as well as a split thereafter.
I like this model because it is really easy to explain the pros and cons of each aspect of the deal depending on how it is structured in the model. A higher equity multiple may mean a lower share of cash split for the investor after the multiple is achieved, maybe even a 0% share thereafter. A lower equity multiple may mean a higher share of cash flow for the investor after the multiple has been received. It is very easy to understand the deal components.
Hurdle Specifics:
1) Repay all equity - A defined cash split percentage is entered that defines how much the LP / GP receives up until 100% of the initial investment is repaid to the investor. It could be 100% / 0% or what have you.
2) After equity is fully repaid, the next cash flow split is defined and that will hold until the equity multiple defined for the investor has been reached (equity multiple means a desired total return on investment - anything above 1 means a positive return and anything less than 1 means not all of the investment has been earned back). For example, an entry of 1.5, means that the full investment has been repaid plus 50% more than the initial investment i.e. $100 invested and $150 has been paid back in total.
Thereafter) Once the equity multiple has been achieved by the investor, any remaining cash flow is split based on a final defined percentage distribution.
The nice thing about this model is the flexibility in the variable inputs. You can choose to make it a hard preferred equity model or soft (based on how cash is split up until the investment is fully repaid)
More output reports include a finalized total IRR for the investor and operator as well as a DCF Analysis for each. There is a visual to show the cash flow splits over the entire project.
Note, the model has no options for an annual preferred return. Instead, the focus is to base cash distributions on equity repayment and an equity multiple achieved for the investor.

Reviews Add a review
No reviews yet

More From smarthelping

Browse our top rated business templates. See All
Stock / Crypto Fund Portfolio Tracker: Multi-member Capable
462
0
This tool was designed for a multi-member fund to keep track of trading activity, the resulting distributions to investors, and…
Volume Discounts: Sensitivity Analysis
596
0
Any business that wants to offer discounts for higher volume purchases will benefit from this volume discount template. Simply enter…
Retirement Planning Financial Model
491
1
This is a retirement planner based on expected investments and the cash flow that produces against expected expenses (including taxes)…
Job Costing Tracker for Managers
545
0
This is a job costing tracker for any business that wants to see weekly and monthly total number of hours…
PPC Advertising Financial Calculator and Sensitivity Analysis
484
0
This is a sensitivity analysis calculator to help anyone who is doing PPC (pay per click) direct marketing or PPC…
IRR Target Investment Calculator
481
19
Investors can be confused with terminology that is used on deals and in offerings. The difference between IRR and ROI…
See All