Talos Guides
Waterfall
Model GP/LP economics, preferred returns, promotes, and distribution tiers.
Purpose
Waterfall analysis explains how deal economics split across sponsor and investor capital.
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When to use it
Partnership economics matter.
Preferred return or promote tiers exist.
A sponsor/investor memo needs distribution clarity.
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Inputs needed
Equity tranches
Preferred return
Catch-up terms
Promote tiers
Distribution basis
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How to read the output
Compare project returns to investor-level returns.
Review each tier trigger.
Check whether assumptions match legal documents.
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Common mistakes
Confusing project IRR with LP IRR.
Skipping catch-up logic.
Using terms not reflected in agreements.
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Next steps
Reports and exports
Decision notes
Professional note
Legal documents control partnership economics. Talos does not provide legal advice.