[Abstract for] Modeling Private Equity Waterfalls: Incentives, Performance Measurement, and Excel Implementation

Authors

• Tom Arnold, University of RichmondFollow
• Summer Liu, University of RichmondFollow
• Cassandra D. Marshall, University of RichmondFollow

Abstract

KEY TAKEAWAYS:

Using Excel’s =LAMBDA and =MAKEARRAY functions allows for the creation of user-defined functions for generating waterfall calculations for a private equity deal, without needing VBA or macro programming.

The three primary waterfall functions determine the waterfall distributions and related performance metrics, including internal rates of return (IRRs) and multiples of invested capital (MOICs), both with and without carried interest.

Copying the cell that uses a waterfall function from the source file to a new file automatically transfers the function and its related intermediate functions. As a result, these functions can be used immediately in other models.

Document Type

Article

Publication Date

9-8-2025

Comments

Please do not cite without permission.

Publisher Statement

Please note that this paper has been accepted for publication. It is forthcoming in the Journal of Private Markets Investing. Only the abstract is available here.

Please do not cite without permission.

Recommended Citation

Arnold, Tom; Liu, Summer; and Marshall, Cassandra D., "[Abstract for] Modeling Private Equity Waterfalls: Incentives, Performance Measurement, and Excel Implementation" (2025). Finance Faculty Publications. 78.
https://scholarship.richmond.edu/finance-faculty-publications/78