Continuation Vehicles Have Gone Mainstream. Here Is What That Means for Sellers.

A few years ago, the term "continuation vehicle" belonged to private-equity specialists and a narrow circle of secondary investors. That has changed quickly. 2025 closed with a record 147 continuation fund transactions globally, roughly 18 percent higher than 2024, according to the William Blair 2026 Secondary Market Report. Total secondary transaction volume reached $226 billion in 2025, and forecasts point to roughly $250 billion for 2026. Ropes & Gray's Q1 2026 update reports that nearly three-quarters of the largest global GPs have now completed at least one continuation transaction. A structure that used to be labeled as a workaround is now a standard item in the sponsor toolkit.

For founders negotiating with private equity buyers, and for management teams already inside sponsor-owned companies, this shift is not academic. It changes the probability distribution of outcomes on the other side of a transaction, and it alters how sellers should think about alignment, incentives, and timing.

What a Continuation Vehicle Actually Does

A continuation vehicle is a new fund created by the same general partner, into which one or more portfolio assets are transferred out of the original fund. The new vehicle typically raises fresh capital from secondary investors and often from the GP's existing limited partners. Mechanically, the effect is that the sponsor keeps operational control of the company for a new hold period, while limited partners in the original fund are offered a choice: receive liquidity now or roll their position into the new vehicle.

The market has differentiated these transactions into two recognizable categories. A multi-asset continuation vehicle (MACV) moves several positions out of an older fund into a new one. A single-asset continuation vehicle (SACV) does the same with one particularly high-conviction asset. The single-asset version has grown faster in the last twenty-four months because sponsors increasingly want to hold their best-performing company longer rather than sell it to a competitor.

In 2025 a third variation gained traction: "CV-squared," meaning a continuation vehicle that itself contains an asset previously rolled through an earlier continuation vehicle. It is early evidence that for some portfolio companies, private ownership is lengthening well beyond the traditional 5-to-7-year fund cycle.

Why It Is Happening Now

Three forces are doing most of the work. The first is limited-partner liquidity pressure. Distributions from private equity have run below long-term averages since 2022, and LPs need cash to fund new commitments and to meet their own obligations. Continuation vehicles provide that liquidity without forcing a sale at an inopportune moment.

The second is GP economics. A well-structured continuation fund locks in a realized return on the original investment, resets the carry clock on the asset, and extends the sponsor's fee-generating relationship. Where the asset is a true outperformer, those economics can be significantly more attractive to the GP than a straight sale to a strategic or another sponsor.

The third is buyer-side capital. Dedicated secondary funds raised roughly $90 billion in 2025, and that capital is specifically looking for the kind of mature, clearly performing assets that CVs offer. A sponsor running a CV in 2026 has a deep, sophisticated pool of counterparties ready to price the transaction.

What This Means for a Founder Selling to Private Equity

The immediate practical consequence is that a sale to private equity does not necessarily mean a sale to a different owner five years later. It may mean the same owner in a different fund, or a continuation structure that extends the sponsor's hold for another three to seven years.

For many founders, that is a positive. If the sponsor has been a strong partner, continuity reduces operational disruption, preserves the management team's relationships, and keeps the strategic plan intact. For others, it is a reason to be deliberate about two things during the initial deal.

The first is rollover economics. A founder rolling a meaningful portion of equity into the new sponsor vehicle should understand whether that rollover has the same terms as the sponsor's own co-invest, how it will be treated if the asset is moved into a continuation vehicle, and what governance rights apply to that new structure. The documents written at the time of the original sale are the documents that will still govern outcomes five or eight years later.

The second is management equity. Continuation vehicles generally require the sponsor to reset or restructure the management incentive plan. Founders and key executives should negotiate the terms of that reset at the original sale, or at minimum ensure that the documents provide a clear, fair framework for re-striking equity rather than leaving it to a future negotiation in which leverage will have shifted.

What It Means for Owners Still Running Sponsor-Owned Companies

Management teams inside portfolio companies that are approaching the end of the sponsor's original fund cycle should plan for a wider set of exit outcomes than they would have planned for in prior years. A strategic sale remains possible. So does a secondary sale to another sponsor. But an increasing share of assets are moving into continuation structures, particularly in sectors where fundamentals are strong and strategic buyers are scarce.

Practically, that means the narrative and data package the team would prepare for a sale is also the narrative and data package that will be presented to secondary investors evaluating a CV. Investing in clean financial reporting, documented operating metrics, and a defensible growth plan creates optionality across every exit path. It is the least regret-inducing preparation a management team can do.

The Forward Look

Three dynamics are worth watching over the next two quarters. The first is credit secondaries. Roughly 15 percent of 2025 continuation fund volume came from credit strategies, and that share is rising quickly. Founders of private-credit-backed businesses should expect similar structuring dynamics to reach them. The second is regulatory posture. The SEC's current direction is lighter touch than it was twelve months ago, and the private fund rule's vacated elements mean fewer mandated disclosures around CV pricing. That places more of the burden on LPs and co-investors to evaluate fairness themselves, which in turn elevates the importance of well-run processes with independent fairness work. The third is valuation calibration. CV transactions typically mark assets at or near recent third-party benchmarks, but the market is watching closely for signs that any sponsor is using the structure to defer a write-down. The pattern is rare so far, but scrutiny on this point is increasing.