European waterfall - Market?
What’s market at UMM/MF buyout firms — European or American/deal-by-deal waterfalls?
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Based on the WSO Dataset, discussions around waterfalls in European markets, especially in the context of UMM/MF (Upper Middle Market/Mega Fund) buyout firms, often highlight a preference for deal-by-deal waterfalls rather than American or European standardized structures. This approach allows for flexibility and can be tailored to the specific dynamics of each deal, accommodating the diverse nature of European markets and regulatory environments. Deal-by-deal waterfalls enable firms to negotiate terms that are most favorable and appropriate for the unique aspects of each transaction, reflecting the varied investment landscape across Europe.
Sources: What waterfalls are you seeing in today's market for developments you're working on?, Best European mid market buyout funds, Best-performing MM / UMM funds in Europe, Private Equity in London - US MFs vs European Funds, Your Thoughts on An Office Acquisition Deal
Entirely geographic dependent.
In the US: deal by deal or American, but there are more than a handful of exceptions and LP carveouts.
In Europe and RoW: European or whole fund, with exceptions (typically for the “global” or transatlantic ones)
If you're at a traditional fund, European is market. If independent sponsor, likely be structured as deal-by-deal.
American waterfalls are a highly underrated aspect of LMM / IS model.
If you are european without hurdle you are just as good as American btw (think only Advent is like this).
No because you still need the fund to return 1x. American is the deal returns 1x then preferred hurdle if any then sponsor gets carry with claw back if fund doesn't return, and European is fund returns 1x then hurdle then carry.
No with a hurdle you need to return 1x + hurdle rate and fees vs just 1x + fees, makes a massive difference in the timing of carry payouts (1-2 years). The quantum under any arrangement stays the same roughly, the key difference is the timing of payment
American you get distributions as soon as the first exits come through (~4 years in) vs European (~7 years in)
Not sure what this response has to do with me disagreeing with this statement from you "european without hurdle you are just as good as American"
regardless of hurdle American distributes faster so it is not just as good
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