Sponsors Test Second-Generation Continuation Vehicles as Exit Strategy

As early continuation vehicles reach maturity, sponsors are beginning to test “CV-squared” transactions—moving assets from one continuation vehicle to another—as a way to (again) extend the hold period and offer liquidity to investors.

Continuation funds accounted for nearly 20 percent of exits in the first half of 2025, according to Jefferies, as M&A and IPO exit paths remained scarce. Of those, a growing portion are now pursuing the alternative exit strategy for the second time in a row.

Accel-KKR extended its ownership of HR solutions platform isolved via a $1.9 billion second continuation vehicle. CapVest is attempting to move Curium Pharma to a second continuation vehicle, and PAI Partners is looking to do the same with ice cream maker Froneri.

Not all efforts succeed: Revelstoke Capital Partners shelved a follow-on continuation fund for Fast Pace Health after investor pushback, Bloomberg reported.

“This is certainly an emerging theme,” Matthew Wesley, until recently the global head of the private capital group at Jefferies, told Bloomberg. “Raising a continuation vehicle on a continuation vehicle is not yet routine, simply because the CV market, and the single-asset CV market in particular, only really started gaining momentum four or five years ago. We are only now starting to come to the end of the natural life of those vehicles, and some sponsors are thinking about whether a second continuation vehicle could be the right exit path for some companies.”

“I think it is inevitable that we are going to see more of these deals,” adds Gavin Anderson, partner at Debevoise & Plimpton. “We are now reaching a point where a critical mass of continuation vehicles will be reaching the end of their life, and sponsors are wondering what to do next.” He is measured on scope: “I still believe these deals will be the exception rather than the rule,” Anderson says. “Everyone, ultimately, wants to see a third-party exit, but we are bound to start seeing this happen more often.”

First-generation CVs were pitched to hold a standout asset longer while giving limited partners a cash option. The second time around, the pitch is largely the same: sponsors believe there’s still ‘meat on the bone’ and want to further extend their hold.

In other cases, returning or lead investors need liquidity and will push the sponsors toward a continuation vehicle if there’s no other viable exit path on the table.

Incentives can also align for secondaries funds to push for a second CV. “Secondaries funds have a fixed term and need to work within a prescribed exit timeline,” Campbell Lutyens’ Gerald Cooper tells Private Equity International. “They also have preferred return hurdles that they need to be cognisant of, so a second continuation vehicle may be as useful a portfolio management tool for them as it is for the underlying sponsor.”

So far, performance data appears to support sponsors’ position that CVs can be an important tool for capturing longer-term upside on an asset. Evercore Private Capital Advisory’s latest continuation fund report shows that by at least one measure, single-asset CVs have outperformed traditional buyouts in recent years, and they typically carry lower management fees than flagship funds.