Continuation vehicles (CVs) are becoming a defining feature of private equity exit strategies, with implications that could fundamentally reshape the industry’s traditional buyout model, according to a report by Bloomberg citing new research from Schroders Capital, the private assets division of Schroders.
As the exit environment remains challenging, PE firms across the market spectrum – from large buyout houses to lower mid-market players – are increasingly turning to continuation structures to extend hold periods and unlock additional value.
Schroders’ study highlights that the growing use of CVs may disrupt the traditional flow of fund-to-fund transactions, historically a key source of deal activity, particularly in the mid and upper buyout segments.
Continuation-led exits accounted for approximately $45bn in 2024, representing around 7% of total private equity distributions, the report states. Looking ahead, Schroders projects that CV-related activity could displace up to 8% of overall deal flow for mid and large-cap buyouts over the next decade.
The growing adoption of CVs comes as firms look to generate liquidity and drive returns amid a subdued M&A and IPO backdrop.
However, Schroders notes that even with a rebound in public markets, continuation vehicles are likely to remain a core part of the exit toolkit – particularly as sponsors increasingly reserve them for high-quality, fast-growing portfolio companies.
Total CV deal volume is expected to rise from just over $70bn in 2024 to more than $300bn by 2034, signalling a structural shift in exit preferences.
The study also notes that CVs are gaining traction with private wealth investors, a growing focus for the PE industry. These structures offer lower fees – typically half those of traditional buyouts – faster liquidity (by up to 25%), and greater predictability of returns.
With LPs increasingly receptive to these structures, Schroders anticipates a gradual reconfiguration of the private equity model as continuation strategies mature and scale.
