IRR Hurdles with GP Catch-up

Description
This model builds off the more traditional IRR hurdle cash flow waterfall that lets the user define how cash is split up to each LP IRR hurdle that is achieved. If you are in deals where the GP / sponsor is contributing some of the initial investment (usually 5-20%), then it might help even out the expected returns by allowing the GP to earn a catch-up of the cash flows until their IRR reaches a certain level.

It becomes relevant in situations where the LP has a larger share of the cash flows during the initial base hurdle and once that is reached, a new 'catch-up' hurdle hits where the GP gets 100% of the cash flows until they also achieve a defined IRR. Now, since the base hurdle was not pari passu, the catch-up makes it more balanced.

After the catch-up, the waterfall continues to work like normal for the remaining LP hurdle rates. What this does is give the GP a little more certainty for their share of the cash flows over time and in return for that certainty, they will often reduce their promote hurdles that are deeper in the waterfall.

At the end of the day there is no defined right or wrong and it is a deal-by-deal analysis. This gives some more flexibility.

Final results include an equity multiple, final IRR, and DCF Analysis.

This template is also included in two bundles:
- All Models Bundle: https://www.eloquens.com/tool/P8Y4TX4v/finance/financial-forecasting-models/financial-models-120-useful-and-usable-logic
- Joint Venture Waterfalls: https://www.eloquens.com/tool/MQJ8h73v/finance/joint-ventures/joint-venture-template-bundle