This third modeling course introduces students to the theory and practical construction of “waterfalls” for existing and new Microsoft Excel spreadsheet models.
The waterfall is the method of distributing profits among partners within a transaction. In more complex transactions, profits are not distributed pari passu. (Pari passu is the proportional distribution of profits according to the percentage of capital invested—for example, with an investor who provides 80 percent of the capital receiving 80 percent of the profit.)
During the first session, students will gain a theoretical understanding of what a waterfall is, as well as be exposed to the Microsoft Excel functions required to construct a waterfall. In the second session, students will construct a waterfall from a blank spreadsheet that can be incorporated into all existing spreadsheet models.
Students Will Learn
- Basic types of equity partnership distributions.
- The key inputs to the waterfall distribution from a joint venture agreement.
- How to model variable-return distributions to the project sponsor and equity investor.
- Advanced valuation formulas in Excel.
- How to "bolt on" the waterfall to all existing pro forma models
June 13, 2014