Private equity firms are increasingly turning to continuation vehicles as a core exit route, with sales of assets from older funds into newly raised vehicles on track to reach record levels in 2025, according to a report by the Financial Times.
Industry estimates suggest that around 20 per cent of all private equity exits this year will involve continuation funds, up from approximately 12–13 per cent in 2024. According to Raymond James, transaction volumes for such deals could reach $107bn by year-end, compared with $70bn last year, reflecting sustained pressure on traditional exit markets.
Continuation vehicles allow private equity managers to sell portfolio companies from ageing funds into new vehicles that they also manage, bringing in fresh capital from new investors while providing liquidity to existing limited partners. The structure has gained traction as buyout firms struggle to achieve target valuations from strategic buyers or public markets and instead opt to retain ownership of high-quality assets for longer.
Jefferies estimates global continuation vehicle transaction volumes will approach $100bn in 2025, underlining how the structure has moved from a niche solution to a mainstream portfolio management tool.
Several large managers have executed multi-billion-dollar continuation deals this year. PAI Partners, for example, sold part of its stake in ice cream group Froneri – valued at €15bn – into a continuation vehicle for the second time. Vista Equity Partners, New Mountain Capital and Inflexion have also used the structure to partially exit some of their largest portfolio companies.
Market participants note that continuation vehicles have become an effective liquidity mechanism in a challenging exit environment. As exit valuations recover only gradually from 2024 lows, the structure offers flexibility for managers and investors alike, while enabling firms to continue compounding value in assets they believe have further upside.
The growth of continuation vehicles has also been driven by their economics for general partners, who can generate additional management fees and potentially new performance fees by extending ownership of assets held in older funds. Some firms that have not yet adopted the structure, including Sweden-based EQT, have publicly indicated interest in doing so.
However, the increasing prevalence of continuation deals has drawn scrutiny from some limited partners, particularly around valuation and conflicts of interest, given that the same manager sits on both sides of the transaction. Investors have raised concerns about whether assets are transferred at fair value and whether all LPs have the resources to independently assess individual portfolio companies.
Private equity firms argue that these risks are mitigated by offering existing investors the option to roll their stakes into the new vehicle and by involving new third-party investors to help establish pricing.
Traditional exits though, remain the preferred outcome for many investors, with research from Bain & Company indicating that nearly two-thirds of private equity LPs continue to favour conventional exits through trade sales or IPOs.
