Conceptually, why is it normal to dilute GP equity when paying a promote? As opposed to just diluting the LP?
It's my understanding that in legal terms, when the term 'promote' is used, it typically refers to a dilution from both the GP and the LP in calculating what portion of cash flows is defined as being promoted. However, usually the practice involves diluting both the GP and LP cash flows in favor of paying the promote, which typically goes towards paying the GP themselves.
Conceptually, I'm trying to wrap my head around why this is the normal practice. Why would the GP take less money in Hurdle 2 than they are entitled to just to pay themselves under a different definition?
Thanks
Eum saepe perferendis magni velit quia molestiae. Quae incidunt laudantium beatae ut consequatur ea molestias. Repudiandae aut voluptatem culpa quae.
Iusto eum reiciendis dolor optio aut. Voluptatum eos est recusandae labore numquam non quibusdam.
Deleniti id molestiae repellendus cumque non sed facilis. Iusto rerum dolores fugiat consequuntur. Nisi optio exercitationem maiores non a voluptatem modi. Esse beatae dicta aut qui soluta. Repellendus rerum qui sapiente aut. Rerum sit id labore et magni debitis.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...