Private equity firms executed **continuation vehicle deals** worth an estimated $107 billion in 2025, shattering prior records as buyout groups turned to self-sales to unlock liquidity in a **stressed exit environment**.[1] This **private equity continuation fund trend**, up from $70 billion in 2024, now accounts for roughly one-fifth of all PE sales, reflecting broader struggles to achieve desired valuations from external buyers or public markets.[1]
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The Mechanics of Self-Dealing in Private Equity
Continuation vehicles allow PE firms to transfer mature assets from older funds into new entities backed by fresh investor capital, often at inflated prices that generate immediate profits and ongoing **management fees** for the parent firm.[1] Sunaina Sinha Haldea, global head of private capital advisory at Raymond James, described these as a “**win-win-win liquidity solution**” amid recovering but still subdued exit values from 2024 lows.[1] Critics, including major institutions like the IMF, Bank for International Settlements, and US Federal Reserve, label the sector “**opaque**,” warning of systemic risks hidden from public view.[1]
Despite investor preferences—Bain surveys show nearly two-thirds of limited partners favor traditional exits—PE general partners wield significant control, prioritizing higher returns in a high-interest-rate hangover.[1] This **private equity exit strategies in 2025** shift circumvents limited bank restrictions post-2008, fueling unchecked growth in an $11 trillion industry.[2]
Market Context: Stalling Deals and Record Dry Powder
2025 private markets painted a tale of contrasts: optimism from AI-driven narratives and data center SPVs clashed with stalling deal flow, record **dry powder** at all-time highs, and distress signals like United Site Services’ bankruptcy.[2] The port-a-potty rental firm, acquired by Platinum Equity in 2017 from another PE fund, filed to shed $2.4 billion in debt, wiping out equity holders—a stark example of **overleveraged assets** facing refinancing at higher rates.[2] Investopedia noted firms increasingly trading assets internally, sometimes at losses, amid sub-investment-grade lending woes.[2]
Projections underscore private credit’s boom, with Moody’s forecasting $3 trillion AUM by 2028 and VanEck at $2.8 trillion by 2030, driven by leveraged buyouts and flight-to-quality bets.[2] Yet, high valuations masked second-half weaknesses, tariff pressures, and failures like Tricolor lending exposures highlighted by Steve Eisman and Glenn Schorr.[2]
Implications for LPs, GPs, and Regulators
- Limited Partners (LPs): Face diluted choice in exits, with continuation deals prioritizing GP fees over optimal sales—potentially eroding **private equity LP returns** in prolonged hold periods.
- General Partners (GPs): Gain liquidity and fees but risk reputational hits; tokenization emerges as an “**off-ramp**” for zombie assets, fragmenting illiquid holdings into tradeable tokens per innovators like RealiT.[2]
- Regulators and Markets: Growing opacity fuels calls for transparency, especially as 2026 looms with resilient growth but high debt and valuation risks.[3]
2025 Continuation Vehicle Deal Volume
| Year | Deal Volume ($B) | % of Total PE Sales |
|---|---|---|
| 2024 | 70 | 12-13% |
| 2025 | 107 | ~20% |
This table illustrates the **record-breaking growth in private equity self-sales**, underscoring adaptation to **cross-border M&A trends 2025** constraints and public market hesitancy.[1]
Looking to 2026, PE firms may lean further on innovations like asset tokenization to navigate **private equity exit strategies in SaaS** and beyond, but persistent leverage and opacity demand vigilant LP oversight and potential regulatory scrutiny.[1][2]
Sources
https://www.wsws.org/en/articles/2026/01/06/qpga-j06.html, https://wealthnwisdom.substack.com/p/the-private-market-rollercoaster, https://www.amundi.com/institutional/article/2026-preview-navigating-markets-after-exceptional-2025
