Continuation Vehicles Surge Amid Stalled Private Equity Exits in 2025

What’s New

Private equity firms are leaning heavily on continuation vehicles (CVs) in 2025 to hold onto high-quality assets longer, according to KPMG’s Pulse of Private Equity Q2’25. With exit markets weak — particularly for IPOs and secondary buyouts — GPs are opting to roll prized portfolio companies into new funds rather than sell at a discount. LPs, however, are pushing back over valuation transparency and the risk of “stranded” assets.

Why It Matters

Continuation vehicles are reshaping PE exit timelines, enabling managers to extend ownership and ride out market headwinds. But rising LP skepticism could force more traditional exits in the near term, potentially triggering a wave of sales as capital return pressures mount.

Big Picture Drivers

• Weak Exit Markets: IPO droughts and cautious M&A buyers are slowing traditional exits.

• Asset Quality Divide: GPs prefer to hold top-tier companies rather than sell below perceived value.

• Liquidity Pressures: LPs want distributions after years of muted exits, creating tension with GPs.

• Flexibility Advantage: CVs let managers keep control and deploy fresh capital into proven assets.

• Valuation Scrutiny: Concerns around mark-to-market accuracy and GP incentives are growing.

By The Numbers

• $501.9B — Global PE exit value at midyear 2025, but concentrated in fewer, bigger deals.

• 0 — IPO exits in UK PE at midyear, after just $1.3B in all of 2024.

• $8.8B — UK secondary buyout value YTD, far below 2024’s $34.7B.

• Multiple Years — Typical CV holding period extension for assets in current structures.

• High Single Digits (%) — Average carry fees on CV deals, often contentious with LPs.

Key Trends to Watch

• Forced Exits Ahead: LP pressure could compel more sales in H2 2025, even at lower valuations.

• Dual-Track Strategies: GPs may pair CV structures with IPO or sale options to appease LPs.

• LP Negotiation Power: In fundraising’s slow climate, LP demands for exit clarity will carry more weight.

• Sector Focus: Expect CVs to concentrate in resilient areas like healthcare, infrastructure, and AI infrastructure.

The Wrap

Continuation vehicles are giving PE managers breathing room in a choked exit market — but at the cost of growing LP mistrust. With fundraising soft and liquidity demands high, the balance between asset patience and investor pressure could define dealmaking in the back half of 2025.