Rethinking Exits in Private Equity: Why Continuation Vehicles Are Redefining the Playbook

Introduction

Continuation vehicles (“CVs”) have moved from the periphery of private equity to the center of today’s exit conversation. As traditional liquidity pathways navigate cyclical uncertainty and structural constraints, investors and sponsors are increasingly reexamining what “exit” really means. 

Our view is clear: continuation vehicles are not a temporary substitute for muted exit markets — they represent a durable evolution in how private equity firms manage, monetize, and extend ownership of their highest-quality assets. 

In this environment, the question is no longer whether continuation vehicles will play a role, but how they will reshape the broader exit landscape. Drawing on our experience as long-term capital partners, we see continuation vehicles less as an opportunistic solution and more as a strategic tool — one that aligns investor outcomes, can preserve value creation, and challenges the traditional notion of forced liquidity. 

We sat down with Chris Crampton, Head of Blue Owl Strategic Equity, to share our perspective on this shift and to unpack how continuation vehicles are redefining exit dynamics across the private equity ecosystem.

Q&A

Q: How should investors understand continuation vehicles and their role in today’s private equity environment?

CVs are transactions that allow private equity sponsors to retain ownership of high-performing assets while offering liquidity options to existing investors. Historically, CVs were often associated with liquidity generation, and initially were executed with less than stellar performing assets. Today, however, they are more fundamentally a tool for extending ownership duration, allowing sponsors to avoid prematurely exiting assets where they believe additional upside can be realized with time and capital. 

Sponsors pursue continuation vehicle transactions for a variety of reasons, with distribution to paid-in capital (“DPI”) generation, in our view, increasingly a byproduct rather than the primary motivation. At a fundamental level, GPs use CVs to retain ownership of their highest performing, highest conviction assets – businesses where operational value creation initiatives are underway and where they believe the majority of upside remains ahead. As sponsors have become more deeply engaged with operating partners and management teams on these initiatives (often requiring meaningful time, effort, and incremental capital) investment committees are increasingly questioning why that future upside should be transferred to the next private equity buyer, rather than retained by the existing sponsor through a continuation vehicle.

In our experience, many senior executives are drawn to private equity precisely because it allows them to avoid the operational complexity, distraction, and scrutiny associated with running a public company. Taken together, these factors suggest that the IPO market is, in our view, becoming a less efficient, less predictable, and structurally less attractive exit mechanism for private equity firms, reinforcing our perspective that its role in the buyout exit toolkit will continue to diminish over time, particularly as the growth in alternative exits like continuation funds accelerates. Indeed, more PE-backed buyout companies are staying private for longer, avoiding the volatility, cost, regulatory and public spotlight challenges associated with being public.

Q: If M&A market activity returns, are continuation vehicles still structurally relevant?

Our view is that a recovery in M&A activity would not diminish the relevance of continuation vehicles. In fact, history suggests the two are not mutually exclusive. 2021 marked an earlier peak for continuation fund volumes and, notably, coincided with the peak of sponsor-to-sponsor M&A activity, underscoring that CVs can function as a strategic portfolio management tool rather than a cyclical substitute for exits.⁷ Market observers have noted that, as the GP led market has matured, continuation vehicles have captured a meaningful share of traditional sponsor exits – with estimates suggesting that CVs have fundamentally captured ~10–15%+ of sponsor to sponsor M&A volume.⁸ Together, this evidence supports the view that continuation funds are likely to remain a durable and complementary exit pathway should M&A activity significantly accelerate.

Q: How does the IPO market compare as an exit pathway?

Our view is that the IPO market, independent of the rise of continuation funds, is in secular decline as a preferred exit route for traditional buyout investors due to several structural limitations and challenges:

Q: When does it make sense for a sponsor to tap the IPO market as an exit mechanism?

We believe the IPO market tends to be best suited for larger, faster growing, venture backed companies, where scale, growth, and investor appetite more efficiently align. A key advantage of public markets is the ability to sell equity on a forward looking basis, rather than the traditional last-twelve-months (“LTM”) framework more typical in buyouts. For high growth businesses — often with smaller, minority venture investors with a more streamlined path to exit — this forward valuation can offset some of the structural challenges associated with IPOs. For more mature, less high growth, traditional buyout investments, however, the complexity, cost, and uncertainty of the public markets often outweigh the benefits, and we believe many sponsors — particularly those that initiated IPOs but struggled to fully exit positions during the 2019–2021 window — would agree with that assessment.

Q: To what extent would a reopening of the IPO market affect continuation vehicle activity?

Very little, in our view. In addition to our belief that IPOs are in secular decline as an exit path for traditional buyouts, the continuation vehicle market remains predominantly a middle market asset class. While CV transactions have grown in size and are increasingly viable for larger companies, we believe the vast majority of activity continues to involve middle to upper middle market businesses with enterprise values between approximately $500 million and $3 billion — companies that are generally not well suited to the public markets. As a result, we believe a reopening of the IPO market is unlikely to meaningfully displace continuation vehicles as an exit alternative.

Q: Against this backdrop, what structural factors are driving the continued growth of continuation vehicles?

In our view, the ability of a sponsor to retain ownership of their highest conviction, best performing assets while concurrently generating DPI optionality for LPs remains the chief reason for executing a CV transaction. However, there are several other critical factors – many of which are often less well understood or appreciated – that continue to support growth in continuation vehicles:

Q: What rationale for CVs do you believe are underappreciated in the market?

We believe the ability for lower to middle market sponsors to raise meaningful primary capital through a continuation vehicle is one of the most underreported and underappreciated benefits of CV transactions. In many cases, secondary investors can provide 20% or more of total commitments as primary capital¹¹, typically earmarked for follow on M&A or other shareholder accretive initiatives. For smaller sponsors executing a CV around their highest conviction, best performing asset, this incremental capital can represent a material amount relative to the size of the original fund. Absent the continuation fund market, those sponsors would often have little choice but to exit the asset prematurely, simply because the legacy fund lacked sufficient capacity to support the company’s next phase of growth.

Q: What about management teams? How do they think about continuation funds?

We believe the benefits to management teams are another underappreciated benefit of a continuation fund transaction. From a management team perspective, continuation vehicles are often preferable due to:

Less disruptive execution:

Compared to a full sale, CVs are typically less time-intensive and significantly less disruptive to senior leadership, allowing executives to remain focused on running the business rather than managing a prolonged M&A or IPO process.

Reduced execution risk:

A CV can help avoid the stigma and uncertainty associated with a failed or delayed sale process, which can distract employees, unsettle customers, and weaken or impair growth in the underlying business.

Continuity in governance:

These transactions typically preserve existing governance structures and effective board dynamics, while limiting the “new partner risk” associated with introducing a new GP owner with a different culture or strategic priorities.

Liquidity with ongoing upside:

CVs often allow management teams to take some liquidity off the table — typically a minority portion of their ownership and less than would be sold in a full M&A transaction — while maintaining potential upside participation, a dynamic sponsors sometimes describe as “halftime” to their management teams: a moment to reset, crystallize some value, and recommit to the next phase of growth with continuity and alignment intact.

Q: How do you view the long-term outlook for continuation vehicles?

We believe the secular tailwinds underpinning the continuation vehicle market will not only endure but accelerate over the long term. As dedicated buyside capital for CVs continues to grow, we expect continuation funds to become more frequent, larger in scale, and increasingly oriented toward larger, high quality buyout assets, particularly for sponsors that historically relied on the more expensive, time consuming, and uncertain IPO exit path discussed earlier. What began as a niche liquidity solution has evolved into a mainstream portfolio management tool, representing an estimated ~14% of sponsor exits in 2025¹², roughly tripling its share in just five years. At the same time, many scaled, high-quality assets are increasingly remaining private, effectively achieving “private IPO” status via sponsor-led liquidity events and further reinforcing the demand for continuation vehicles as an alternative liquidity solutions.

While we believe continuation vehicles offer compelling structural advantages, they are not without risk. CV transactions involve single-asset or concentrated portfolio exposure, valuation complexity, potential GP-LP misalignment, and extended illiquidity. As with any private markets strategy, past performance and structural tailwinds do not guarantee future outcomes.

Looking ahead, we expect this share to continue to expand as the asset class grows, matures, and becomes more institutionalized and widely embraced by both GPs and LPs. Indeed, we believe the long-term outlook for continuation vehicles remains exceptionally strong, and we are excited to be active participants in this important evolution in the private equity landscape.