Model the waterfall. Defend every number.
Merger Waterfall takes the deal’s most error-prone model — the liquidation-preference stack, participation, caps, and conversions — and turns it into one picture where every dollar traces back to its tier.
Northwind Logistics acquired by Atlas Freight Group · $15.00M total consideration
The whole $15M deal, on one axis ↓The Deal
Enterprise value → net equity proceeds
To Stakeholders
Net equity proceeds → every check
Net Equity Proceeds
$11.85M
Total Distributed
$11.85M
Classes Converting
0
The problem
The waterfall is the most error-prone model on the desk.
Every firm keeps a version — a multi-tab spreadsheet one analyst maintains and rebuilds for each new scenario. The preference-and-conversion math is where deals quietly go wrong, and a spreadsheet rarely tells you when it has.
94%
of audited spreadsheets held at least one error
Panko, University of Hawaiʻi
$24M
lost to one misaligned copy-paste in a bidding spreadsheet
TransAlta, via The Globe and Mail
Since 1995
a public archive of spreadsheet failures across finance
EuSpRIG horror stories
None of this is a knock on the people who build the models. It’s what happens when the most consequential math in a deal lives in cells no one can fully see.
The approach
One model. Every number traceable.
Merger Waterfall does one thing well: it turns the messiest part of a deal — who gets paid what, and why — into a model you can read at a glance and stand behind under questioning.
The whole deal on one axis
Enterprise value in, every stakeholder's check out — on a single shared scale. Nothing hidden between tabs.
One picture you can hand to a founder, a board, or the other side.
The preference stack, as the docs read it
Multiples, participation, caps, and force-convert thresholds. The as-converted-vs-preference election is solved for you — every round.
The calculation that breaks Excel, handled by the engine.
Every number traces to its tier
Click any figure to the preference, participation, or residual it came from. Export to Excel with live formulas. Share a read-only link.
An answer you can defend line by line, not just present.
How it works
From the term sheet to every check — in four steps.
The same four moves you already make by hand, on one deal that stays consistent from the offer to the last dollar out.
01
Enter the consideration
Cash, stock, escrow, and earnouts — laid out as tranches on a timeline, so closing value and deferred value never blur together.
02
Build the bridge
Debt payoff, working-capital true-up, holdbacks, and fees. Build them from schedules and the bridge to net proceeds reconciles itself.
03
Lay in the cap table
Classes and seniority, liquidation multiples, participation, caps, and conversion ratios — entered the way the term sheet reads.
04
Read the waterfall
Per-class and per-holder proceeds, MOIC, and the audit trail behind every figure — ready to share or export.
Proof
Here's the method — run on a real $15M deal.
No black box. This is the exact logic the engine follows, and the outcome it produces on the deal shown up top.
The method, in five lines
- 1Preferences pay by seniority, most-senior first, until proceeds run out.
- 2Participating classes take a pro-rata slice of the residual — capped where the docs cap them.
- 3For each class, the model compares taking the preference against converting to common, and keeps the higher.
- 4Because one class converting changes what's left for the others, it re-solves until the answer is stable.
- 5Options and warrants are counted fully-diluted, on a treasury-stock basis.
The $15M outcome, by class
0 classes converting| Class | MOIC | Proceeds |
|---|---|---|
| Series B Preferred | 1.00× | $6.00M |
| Series A Preferred | 1.12× | $4.46M |
| Common | 3.08× | $1.23M |
| Option Pool | — | $154k |
| Total distributed | $11.85M |
At a $15.00M exit the $10.00M preference stack dominates: both preferred classes keep their preference, because the model checked conversion every round and it paid less. Common — the founders and team — clears $1.23M. Raise the exit and the same cap table flips a class to convert the instant its as-converted stake beats its preference. The model shows its work either way.
Try it on your next deal.
Build the waterfall once and hand everyone the same picture — the founder, the board, and the other side of the table.