The valuation of continuation fund deals surged by double digits this year as firms scrambled for exit routes during the temporary freeze of deal-making and stock market debuts, FT reported.
Continuation fund sales — deals sold by private equity firms to their own funds — stood at $42 billion this year, up 55% from the 2020 level and 180% higher than in 2019. This covers the value of stakes sold and additional capital raised.
Raymond James Global Head of Private Capital Advisory Sunaina Sinha Haldea attributed the increase to the pandemic, driving firms to look into continuation funds rather than having rivals buy assets and have them make the profits.
Sinha Haldea expects continuation fund deals to be valued at over $400 billion in 10 years, as she noted that she saw the emergence of companies selling into a continuation fund and then selling into a second one after a few years.
Continuation funds have an average lifespan of five years and are usually backed by a group of external investors.