The private-equity ('PE') process seems simple enough…
Investors agree to lock up their money for a set number of years. The PE fund uses that money to buy businesses, improve them, and sell them for a profit.
On the expiration date, the PE fund distributes the profits to investors and shuts down.
Continuation vehicles ("CVs") have complicated this process... They let PE firms hold onto businesses a bit longer... and give early investors a chance to take money off the table.
Firms now use CVs to delay selling assets and keep collecting fees. CV volume was around $7 billion in 2015. A decade later, it blew past $100 billion.
Simply put, CVs have become the pressure valve keeping PE from buckling under the weight of today's weak selling market.
PE firms are returning less cash to investors…
Between 2022 and 2024, these firms returned just 13%. That was far below the historical 28% return.
This is a problem, because PE runs on recycled money... Investors need cash from old funds before they can invest in new ones. And fund managers want good returns to gild their track records and continuously raise money.
PE funds are struggling to generate new cash. For every $3 PE firms are trying to raise, only $1 of capital is available. That gap is more than twice as big as it usually is.
In a healthier market, firms sell companies to strategic buyers, take them public, or sell them to another sponsor. In today's market, many are turning inward.
That's where CVs come in.
CVs help PE funds sell companies to themselves... when no other buyers are available...
Typically, PE firms could retain a good company in a single-asset CV.
In recent years, firms have rolled a whole portfolio of assets – regardless of their quality – into a multi-asset CV.
CVs represented 20% of global PE exit volume as of 2025. So about one out of every five "sales" of PE-owned companies went to a CV run by the same firm.
Nearly 75% of the largest global PE firms have now completed at least one CV transaction.
Simply put, CVs have gone from niche tool to escape hatch.
CVs are also a huge conflict of interest…
The same PE sponsor often sits on both sides of the CV transaction.
It sells an asset out of an older fund and buys that asset for a new fund. The sponsor also steers the price and often earns fees from the new vehicle.
Single-asset CVs were built for rare trophy assets that are worth holding on to.
Multi-asset CVs are a different story. They can move a whole portfolio, or the leftovers of an aging fund, into a new structure.
Single-asset CVs tend to perform better and have higher valuations than multi-asset CVs.
The CV structure is stretched too thin...
The PE market is increasingly making "CV squared" deals... where an existing CV is sold into a new CV. That's another clear sign of weakness.
And one-fifth of all PE-owned asset sales are going to the very same PE funds. That tells us real buyers are drying up.
CVs started off as a way to hold on to winners. But they're now being used to prop up zombie companies.
These are all good reasons to tread carefully across the PE market.
Regards,
Rob Spivey
May 5, 2026
