Free Excel Model · Equity Waterfall
5-Tier IRR and Equity Multiple Hybrid Waterfall Model
A five-tier waterfall where each tier has to clear two tests, an IRR hurdle and an equity multiple threshold, before the GP earns a higher split. It shows why IRR alone can be misleading.
- 5 tiers
- IRR and equity multiple
- Live formulas
What's inside
Model features
- Two tests per tier. Each tier has its own IRR hurdle and its own equity multiple threshold.
- Both must clear. If either test fails, distributions stay at the prior tier's split.
- Return of capital and pref. Equity comes back and the pref is paid before profit is split.
- GP catch-up. Brings the GP to its full share of profit before the promote tiers start.
- Returns by party. LP and GP IRR, equity multiple and dollars at every tier.
- Editable inputs. Every hurdle, threshold and split is an input you can change.
Learn
Why use two tests
IRR rewards speed and equity multiple rewards size. A deal that sells quickly can show a high IRR while returning very little profit, and a long hold can return a lot of profit at a modest IRR.
Requiring both tests means the GP earns the higher split only when the deal performs on speed and on size. Compare it with the IRR-only catch-up and pari passu models to see the difference.
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