Continuation funds emerge as a key strategy in private equity’s long-term growth playbook

Private equity firms are increasingly using continuation funds to extend ownership of portfolio companies.

These funds, which saw rapid growth between 2019 and 2021, provide fresh capital to high-potential assets, ensuring continued value creation.

Continuation funds are particularly valuable in slower dealmaking environments. They give private equity firms the flexibility to address operational challenges and wait for favourable market conditions before exiting investments. For instance, firms like Revelstoke Capital Partners and Platinum Equity have used continuation funds to support businesses in complex situations, including restructuring debt and driving operational improvements.

Despite pockets of distress, such as Upstream Rehabilitation and United Site Services, private equity firms have shown their resilience by enacting targeted initiatives to recover margins and position companies for long-term growth. As Isabel Dische of Ropes & Gray noted, the secondary market remains robust, with deal volume expected to grow in the coming years.

Continuation funds also underline private equity’s commitment to supporting portfolio companies through economic cycles. By leveraging their expertise and resources, firms like Audax Private Equity have implemented operational initiatives that have driven recovery, even in challenging industries.

While some companies face financial strain, the overall growth of the continuation fund market reflects private equity’s ability to adapt and innovate. These funds are not only a lifeline for businesses but also a powerful tool for unlocking long-term value and sustaining economic growth.

Source: Mergers & Acquisitions

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