Deal Structuring

Deal Structuring

Framework for modeling and comparing acquisition structures. Uses validated waterfall calculation code.

Structure Types

Direct Acquisition

• Single investor, 100% equity (plus debt)
• Simplest structure
• All returns accrue to one party
• Best for: smaller deals, single-fund vehicles

Joint Venture with Promote

• GP contributes 5-20% of equity, LP provides balance
• Returns distributed in tiers:
  • Tier 1: Pari passu until pref return (typically 7-9%)
  • Tier 2: GP catch-up (if applicable)
  • Tier 3+: Promote to GP above IRR hurdles
• Typical structures: 80/20 above 8%, 70/30 above 12%, 60/40 above 15%
• All waterfall calculations MUST use returns.py:calculate_waterfall()

Preferred Equity

• Senior equity position with fixed preferred return (8-12%)
• Residual cash flow to common equity sponsor
• Lower risk for preferred investor, higher IRR for common
• Common in capital-constrained situations

Programmatic Partnership

• Multi-deal commitment (e.g., $200M over 3 years)
• Portfolio-level promote calculation (not deal-by-deal)
• Alignment for repeat partnerships
• More complex to model; requires deal-aggregation logic

Key Decision Factors

Factor	Favors JV	Favors Direct	Favors Pref Equity
Capital availability	Low GP capital	Ample capital	Capital-constrained
Deal size	Large (>$50M)	Moderate	Any
GP track record	Proven (LP will trust)	N/A	Any
Return profile	High enough for promote	Moderate	High for sponsor
Complexity tolerance	Higher	Lower	Moderate

Computational Trust

All promote and waterfall calculations MUST be performed by scripts/returns.py:calculate_waterfall(). Do NOT reason through promote tiers or catch-up provisions in natural language.