Waterfall Services

Independent waterfall review, certification, and model builds. We identify calculation errors before distributions go out the door.

3E provides waterfall calculation services to private equity clients at both the investment (JV) level and fund level. We review all legal agreements, past capital activity, and future projections to construct a waterfall that correctly allocates distributions and provides returns for the GP and LPs. Waterfalls are highly technical and governed by complex legal documents. Calculation errors can cause a loss of investor confidence, a loss of profit, and litigation. Investors and partners actively look for third-party verification - and that’s exactly what we provide.

JV/Investment-Level

We provide investment-level waterfall calculation services for individual deals. We review all legal agreements, capital activity, and future projections to construct a waterfall that correctly allocates distributions between the GP and LP. We have calculated distributions for 200+ entities and have found over $55 million in distribution errors from miscalculated waterfalls.

Common Issues We Catch

Misinterpretation of defined terms in legal documents. Preferred return calculation errors. Incorrect compounding periods. Cashflow timing misalignment. Promote vs. cashflow methodology confusion. These are the issues that cost sponsors and LPs real money - and that most internal teams don’t catch because they’re not reading the legal docs line by line.

Fund-Level Waterfalls

We provide fund waterfall calculation services as part of our Fund Management engagement. This includes running quarterly liquidation scenarios, updating the fund model with the latest business plans, and forecasting distributions to all investor classes in accordance with the LPA.

Certification Letter

At the conclusion of every waterfall engagement, 3E delivers a formal Waterfall Certification Letter - an independent, third-party verification that the waterfall has been reviewed and distributions have been calculated in accordance with the governing legal documents.

How it Works

Document Review

1

You send us the JV agreement, LPA, or partnership docs. We read every defined term, promote tier, and distribution mechanic line by line.

Capital Activity Reconstruction

2

We compile the full history of contributions, distributions, and rebalancing events - reconciling your records against the legal framework.

Waterfall Build

3

We construct the waterfall model from scratch based on the legal documents - not from a prior version that may carry inherited errors.

Error Identification & Certification

4

We flag any discrepancies between the legal docs and prior calculations, quantify the dollar impact, and deliver a certified waterfall ready for distribution or audit.