Model a partnership in which the two partners contribute in different times

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Hi Juan,

This is a really interesting modeling challenge – we’ll likely have to go back and forth a bit to accomplish it.

First to answer your question, if the partners are contributing at different times, due to time value of money reasons I can’t think of how the IRR and EMx would be the same. Because the partners are contributing at different times, the amount of distributions to each partner would have to be different in order to hit the same IRR, resulting in differing EMx. Or in reverse, to distribute in such a way to hit the same EMx, the IRR would be different. But without the contributions and distributions being pro rata and pari passu, it would be impossible to match EMx and IRR.

Just thinking out loud, one solution would be to begin analysis when the latter partner first contributes. The former partner would have some accrued contributions (and pref) that would hit at analysis start, and then the partners would contribute pro rata and pari passu from that point, resulting in the same IRR and EMx from that analysis start date.

Perhaps if you want to send me the exact partnership terms that you’re trying to model, I could offer more feedback. If you want to keep the details confidential, send the details to [email protected].

Best,

Spencer

Looking forward to it Juan!