Waterfall Calculation
In any investment structure with multiple classes of capital—from a private equity fund to a structured credit vehicle—the distribution waterfall is the contractual mechanism that dictates the priority and allocation of all cash flows. These calculations are mathematically complex and financially critical, determining how proceeds are shared between investors and managers upon a liquidity event or distribution.
Our Role
Aether specialises in the independent modelling and verification of complex distribution waterfalls. We act as a trusted third party to ensure that cash is allocated with absolute precision, strictly in accordance with the legal and financial terms set out in the Transaction Agreement, shareholders’ agreement, or indenture.
Building robust, transparent financial models that accurately replicate the flow of funds through the various tiers of the waterfall, including return of capital, preferred returns (hurdles), catch-up tranches, and carried interest/promote splits.
Acting as the independent calculation agent to determine the precise allocation of a given distribution, providing all stakeholders with a certified calculation.
Modelling potential outcomes at various exit valuations to provide clarity to both General Partners (GPs) and Limited Partners (LPs) on future distributions.
Certainty Through Independence
By engaging Aether FS to perform or verify the waterfall calculation, all parties gain certainty that the distribution is being administered impartially and accurately. We act as a neutral expert, removing any potential for conflict or perception of bias that might exist if the calculation is performed solely by the fund manager. Our involvement provides LPs with the assurance of an independent check on their returns.
Precision in Complexity
Our team possesses the specialised expertise to interpret and model even the most intricate waterfall arrangements. We understand the nuances of different structures and the importance of each defined term and breakpoint in the legal documentation. We deliver not just a calculation, but a clear and auditable trail that demonstrates how the result was derived, providing absolute transparency and mitigating the risk of future disputes.
Confidential Consultation
For precise and impartial management of your distribution waterfall calculations, please contact us.