Private Equity’s Rise in Continuation Vehicles: Trends, Risks & Impact

The practice of selling portfolio companies to continuation vehicles—funds run by the same private equity manager—is fast becoming mainstream, driven by a combination of market stress, weak external exit valuations, and pressure to deliver liquidity to limited partners (LPs). According to latest data, continuation-based deals accounted for roughly 20% of all PE sales in 2025, a notable rise from 12–13% the prior year, with the total value of such deals expected to approach $100–107 billion [1].

This trend reflects broader exit-market frictions. The IPO market remains subdued, strategic acquirers are cautious, and valuations remain under pressure—pushing firms toward self-dealing solutions. Continuation vehicles allow PE firms to manage aging assets, lock in fees, and defer external sale risk, while providing LPs some exit opportunity even if it’s non-traditional. Current median holding periods have increased: many PE-backed companies now remain held for roughly six years before exit, well above pre-pandemic norms around five years [3][4].

However, institutional investors, including pension funds and sovereign wealth funds, are increasingly concerned about governance and valuation transparency. Key risks include the possibility of undervaluing assets to the detriment of LPs in older funds, especially when the same PE firm stands on both sides of the transaction. A recent lawsuit by the Abu Dhabi Investment Council alleging that Energy & Minerals Group attempted to undervalue an asset in a continuation transaction underscores these tensions [1]. As a result, LPs are scrutinizing GP-led secondaries and continuation vehicles more closely, though a majority still express preference for traditional exits when possible [1].

Strategically, this trend suggests the PE industry is adapting its exit toolbox to strained market dynamics; firms with strong internal governance, transparent valuation practices, and reputation capital stand to gain competitive advantage. On the flip side, LPs may demand reforms—enhanced advisory, wider pricing benchmarks, more robust approval mechanisms—to ensure fair dealing. Open questions remain around how regulation, market recovery, or alternative exit routes (e.g. modest IPO revival) will shift this balance in 2026.