Waterfall Tier Split Calculator

Multi-tier waterfalls split proceeds. This calculator runs each tier.

Distributable cash

Tier 1 (pref) $

Tier 2 (catch-up) $

Residual LP share %

LP total

$12,580,000

Sponsor total

$5,420,000

Residual distribution

$13,400,000

How the math works

LP = pref + residual × LP share. Sponsor = catch-up + residual × sponsor share.

Always run the waterfall at multiple exit scenarios, not just base case. The waterfall math compresses sponsor share at lower returns and amplifies it at higher ones — a deal that looks 80/20 at target IRR may be 95/5 at a weak exit and 60/40 at an overperformer, materially different LP outcomes.

How to Use

Enter total distributable cash.
Enter tier 1 pref return dollars.
Enter tier 2 catch-up dollars.
Enter residual LP/sponsor split (LP %).
Read tier-by-tier distributions.

Frequently Asked Questions

Common tiers?

Tier 1: LP receives pref (8% typical). Tier 2: Sponsor catch-up (often 100% to sponsor until caught up to target share). Tier 3: LP/sponsor split (70/30 or 80/20 typical). Some deals add tier 4+ (hurdle-based higher promotes).

Hurdle IRRs?

Many deals add IRR-based hurdles. Example: 8% pref, then 70/30 to 15% IRR, then 60/40 above 15%, then 50/50 above 20%. Each tier accelerates sponsor share as LP return grows — aligned incentive structure.

European vs American?

European waterfall: all LP capital returned first, then all LP pref, then catch-up, then promote. American: deal-by-deal, promote paid on each exit. Institutional prefers European (less clawback risk).