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What is an Equity Waterfall Structure?

An equity waterfall structure is a method of distributing investment profits among partners based on predefined performance and return thresholds.

How Does It Work?

  • Establishes return priorities.
  • Distributes profits in stages.
  • Rewards performance achievements.
  • Defines investor and sponsor shares.

Why Is It Used?

  • Aligns stakeholder interests.
  • Creates transparent profit sharing.
  • Encourages strong performance.
  • Supports complex investments.

An equity waterfall structure determines how profits are allocated among investors and sponsors. It ensures returns are distributed according to agreed investment terms.

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