Deal StructureValuation
The Double-Dip Waterfall
Also known as: Double-dip waterfall, preference-plus-participation, two-bite structure
TO-original framework. The PE firm gets their money back first through liquidation preferences, then shares in what's left. The founder's rollover sits behind a wall that grows every year.
WHY IT MATTERS
Introduced in D.13 (Liquidation Preferences — How PE Gets Paid Twice). The buyer gets their money back first through the liquidation preference. Then they share in what's left alongside the founder's common equity. The founder's rollover sits behind a wall that grows every year as the preferred return compounds. The exit has to clear that wall before the founder's equity is worth anything — and even then, the buyer takes a cut of the proceeds on the other side. On the Crossfield numbers: at a $250M exit, James would lose money on his $7M rollover. At $300M, he'd break even. His upside started where Ridgeline's expectations ended.