Strong Hook

I stood in a glass-walled boardroom as a partner clicked to the next slide: continuation funds have quietly become the liquidity engine of private markets. The room breathed, not with certainty, but with a new recognition: liquidity isn’t a single door you run through; it’s a set of doors you learn to open on different timelines. The story isn’t about picking a winner today—it’s about preserving optionality tomorrow, even when the ground shifts under your feet.

The more I listened, the more I realized a simple truth: exit strategy in 2025 isn’t a one-time decision. It’s a posture—an ability to choose among paths like continuation funding, sponsor-to-sponsor sales, and selective IPOs, depending on market mood, portfolio quality, and liquidity needs. This isn’t abstract theory; it’s what leaders are actually doing as markets tighten and liquidity channels diversify.

What does it take to plan like that? Not a master plan handed down from on high, but a practical stance that stays flexible as conditions change. Recent patterns show a market leaning into GP-led exits and longer hold periods, while still keeping doors open for public-market channels when conditions improve. In other words, the playbook is evolving, and leaders who read the room—without pretending the room is the same as last year—will fare best.

Problem/Situation Presentation

• Continuation funds and GP-led secondaries are dominating exits in many parts of private markets. In the first half of 2025, exits via continuation funds reached around $41 billion, roughly 19% of total PE exits, with a year-over-year rise of about 60%. That’s not a blip; it’s a structural shift in liquidity design (sources point to FT and industry analyses). The implication for leaders: liquidity now often comes from recasting assets rather than selling them outright.
• Private-equity dry powder remains extremely elevated—roughly in the trillions—much of it tied up in aging funds nearing the end of their life cycles. This dynamic is pushing sponsors toward refreshed or new GP-led exit structures and longer hold periods. About half of PE portfolio companies are more than five years old, with roughly a quarter ten years or older. That aging distribution makes non-traditional exits more attractive and sometimes necessary (Morgan Stanley and related industry notes).
• Across the broader horizon, 2025–2026 is expected to bring a rebound in M&A activity, with private capital playing a central role. Analyses from EY-Parthenon, McKinsey, and PwC point to stronger corporate dealmaking, cross-border growth, AI-enabled transformations, and a renewed appetite for sponsor-driven exits as catalysts for value creation. The public markets, while selective, remain active with several high-profile listings anticipated as conditions permit (Reuter’s market summaries and deal-flow commentaries).
• Retail access to private markets and new fund formats are widening exit options, including more flexible liquidity channels and blended portfolios that combine speed with long-term value creation. The practical effect: leaders must think in terms of an ecosystem of exits rather than a single route—and maintain readiness to pivot as signals change.

These trends aren’t just numbers on a page; they reshape the basic questions leaders face: How much liquidity do we need and by when? Which assets are best suited for a continuation-structure or a sale to another sponsor? When, if ever, should we pursue a public listing? And how can we communicate options and risk to investors who expect steady value creation?

Value of This Article

This piece offers a pragmatic framework for planning exits in a market where liquidity options proliferate and the timing of liquidity is less predictable. You’ll find a concise approach to balance your portfolio’s characteristics with market dynamics, so you can protect capital while maximizing upside.

• A practical decision framework: Map your liquidity needs against market windows, asset quality, and governance constraints. The goal is to preserve optionality—so you can choose a path that aligns with your long-term value creation, not just the nearest exit.
• A clear, collaborative process: Rather than a single grand plan, you’ll see how to structure conversations with LPs, management teams, and potential buyers to surface options early, align incentives, and reduce last-minute scrambles when markets shift.
• Real-world orientation: The guide is anchored in current market behavior—continuation funds as a core tool, aging portfolios driving non-traditional exits, and the ongoing allure of strategic M&A and selective IPOs. Think of these as levers you can pull, depending on your situation, timing, and risk tolerance. Recent industry analyses highlight how these tools are already shaping exit choices for leaders (examples include market reviews from FT, Morgan Stanley, EY-Parthenon, McKinsey, and PwC).
• Actionable, not abstract: You’ll encounter practical considerations—how to assess asset fit for different exit routes, what governance and reporting implications to anticipate, and how to phrase value-creation narratives that resonate with LPs and buyers alike.

What matters most is not locking in a single exit today, but building a credible plan that keeps doors open as conditions change. The question is not simply, “Which exit will we choose?” but “How can we design our portfolio and governance to be fluid enough to choose multiple exits, depending on timing and value creation?”

Mini-Checklist Preview (What you’ll be able to apply after reading)

• Map liquidity needs against four plausible exit paths: continuation-led, sponsor-to-sponsor, traditional sale/IPO, and mixed/portfolio-wide restructurings.
• Gauge asset fit for each path using a simple lens: time to liquidity, value creation opportunities, and governance readiness.
• Prepare LP communications that articulate optionality, risk, and staged milestones.
• Build a lightweight internal playbook that allows you to pivot quickly when market signals shift.

If the market tomorrow tilts back toward aggressive IPOs or accelerates corporate dealmaking, will your plan still feel actionable, or will you be scrambling for a single exit that may no longer fit? The path you choose today should empower tomorrow’s flexibility—and keep you prepared for the next pivot.

What’s your instinct: lock in a preferred exit now, or cultivate a resilient framework that embraces several doors?”} } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } } }

Is Liquidity a Door, or a Hallway? Rethinking Exit Strategies for a Shifting Market

I stood in a glass-walled boardroom as a partner clicked to the next slide: continuation funds have quietly become the liquidity engine of private markets. The room breathed, not with certainty, but with a new recognition: liquidity isn’t a single door you run through; it’s a set of doors you learn to open on different timelines. The story isn’t about picking a winner today—it’s about preserving optionality tomorrow, even when the ground shifts under your feet.

The more I listened, the more I realized a simple truth: exit strategy in 2025 isn’t a one-time decision. It’s a posture—an ability to choose among paths like continuation funding, sponsor-to-sponsor sales, and selective IPOs, depending on market mood, portfolio quality, and liquidity needs. This isn’t abstract theory; it’s what leaders are actually doing as markets tighten and liquidity channels diversify.

What does it take to plan like that? Not a master plan handed down from on high, but a practical stance that stays flexible as conditions change. Recent patterns show a market leaning into GP-led exits and longer hold periods, while still keeping doors open for public-market channels when conditions improve. In other words, the playbook is evolving, and leaders who read the room—without pretending the room is the same as last year—will fare best.

Problem and Situation What’s Changing in Exit Dynamics?

• Continuation funds and GP-led secondaries dominate exits in private markets. In the first half of 2025, exits via continuation funds reached about $41 billion, roughly 19% of total PE exits, with a year-over-year rise of around 60%. This isn’t a blip; it signals a structural shift in liquidity design. The practical implication for leaders: liquidity now often comes from recasting assets rather than selling them outright. (FT reporting and industry discussions)
• Private‑equity dry powder remains extremely elevated—roughly in the trillions—much of it tied up in aging funds nearing the end of their life cycles. This dynamic pushes sponsors toward refreshed or new GP-led exit structures and longer hold periods. About half of PE portfolio companies are more than five years old, with roughly a quarter ten years or older. The aging distribution makes non-traditional exits more attractive and sometimes necessary. (Morgan Stanley and related industry notes)
• Across the broader horizon, 2025–2026 is expected to bring a rebound in M&A activity, with private capital playing a central role. Analyses from EY-Parthenon, McKinsey, and PwC point to stronger corporate dealmaking, cross-border growth, AI-enabled transformations, and renewed appetite for sponsor-driven exits as catalysts for value creation. The public markets remain active but selective, with high-profile listings anticipated as conditions permit. (EY-Parthenon, McKinsey, PwC, Reuters)
• Retail access to private markets and new fund formats are widening exit options, including more flexible liquidity channels and blended portfolios that combine speed with long-term value creation. The practical effect: leaders must think in terms of an ecosystem of exits rather than a single route—and maintain readiness to pivot as signals change. (Industry trends syntheses and market observations)

These patterns aren’t just numbers on a page; they reshape the basic questions leaders face: How much liquidity do we need and by when? Which assets are best suited for a continuation-structure or a sale to another sponsor? When, if ever, should we pursue a public listing? And how can we communicate options and risk to LPs and other stakeholders who expect steady value creation?

Why This Matters: The Value of a Flexible Exit Mindset

• You’re no longer choosing a single exit; you’re constructing a portfolio of exit options that can be activated as conditions shift. This is about preserving optionality—so you can pick a path that aligns with long-term value creation, not just the nearest exit.
• The most resilient leaders are those who surface options early, align incentives among LPs, management teams, and potential buyers, and keep a transparent narrative about risk and timing. The objective isn’t perfection but readiness.
• In practice, the cues aren’t just market; they’re governance and process cues: how you monitor portfolio quality, how you update liquidity forecasts, and how you communicate evolving plans to stakeholders.

A Practical Framework You Can Apply Now

This guide isn’t a grand theory; it’s a concrete, workable approach to planning exits in a market with proliferating liquidity channels. It emphasizes action you can take today and can be adapted to your portfolio mix.

1) Define Your Liquidity Needs (Time, Amount, and Purpose)

• Clarify two or three liquidity milestones (e.g., 12–24 months, 3–5 years) and attach objective metrics (IRR targets, DPI expectations, credit covenants, or governance milestones).
• Map each asset’s hold value versus exit potential under several scenarios (continuation fund, sponsor-to-sponsor, sale/IPO). This makes it easier to see where optionality is strongest.
• Consider the risk tolerance of LPs and the governance bandwidth of the firm; not every asset will fit a GP-led path, and that’s expected.

2) Characterize Each Asset for Exit Fit

• Time to liquidity: How long before an asset can realistically realize meaningful value? Which assets are closer to the end of a value-creation cycle?
• Value creation opportunities: Are there still operational improvements, platform synergies, or strategic sales opportunities that justify longer holds?
• Governance readiness: Do you have the reporting, compliance, and alignment structures to support a non-traditional exit path?

3) Map Exit Routes (With Probabilities and Triggers)

• Contingent path: Continuation funds or GP-led secondaries for assets with solid near-term upside but limited exit markets.
• Sponsor-to-sponsor: For assets where strategic buyers or financial buyers can unlock value through re-organization or roll-ups.
• Traditional or public exit: For assets with robust public-market appeal or strong EBITDA growth profiles.
• Blended or portfolio-wide restructurings: When some assets benefit from a streamlined liquidity process while others retain growth optionality.

4) Governance, Reporting, and Stakeholder Alignment

• Create lightweight playbooks that describe how decisions get made, who signs off, and what information LPs receive at each potential exit stage.
• Prepare value-creation narratives that resonate with LPs and buyers, highlighting how optionality reduces risk and preserves upside through market cycles.
• Develop a cadence for updating exit plans as market signals shift; avoid last-minute scrambles by keeping a forward-looking dashboard.

5) Direct, Practical Communication Plans

• Draft LP-facing notes that explain the concept of optionality and the rationale for multiple exit paths.
• Prepare buyer-facing materials that emphasize any structural signals (operating improvements, platform consolidation, or cross-portfolio synergies).
• Use scenarios to illustrate how timing, market mood, and asset quality interact to determine the most appropriate exit channel.

6) A Lightweight Playbook You Can Start Today

• Gather data: a clean, current asset-by-asset view of lifecycle stage, upside potential, and governance readiness.
• Model scenarios: build 3–4 exit-path scenarios with different market conditions and asset performance assumptions.
• Draft templates: LP update language, internal decision memos, and a few one-page narratives for potential buyers.
• Schedule early governance discussions: invite key LPs and management teams into a shared conversation about optionality and timing.

Asset-by-Asset Playbook (Illustrative Scenarios)

• Tech/Software Portfolio: Strong growth potential but moderate public-market visibility. A continuation-fund path can unlock near-term liquidity while preserving upside from platform enhancements and cross-sell opportunities.
• Industrials/Manufacturing: Slower growth but sturdy cash flows and strategic rationales for consolidation. Sponsor-to-sponsor or selective carve-outs may maximize value while maintaining exit optionality.
• Healthcare/Biotech: High uncertainty but potential for strategic partnerships or IPO readiness if clinical milestones align with market windows.
• Consumer Brands: Brand equity and margin improvements can drive a successful public listing or a strategic sale to a larger consumer platform.

These are not prescriptions for every asset, but lenses to help you see where each exit route might be strongest—and when to keep doors open for the next signal.

Latest Trends and What They Mean for You

• The emergence of continuation funds as a core liquidity tool is not a temporary tactic; it’s becoming a structural element of exit design. This shift reduces urgency to sell and can align long-term value creation with liquidity needs. (FT and industry analyses)
• The high level of dry powder and aging portfolios pressures funds toward GP-led structures and longer holds, making non-traditional exits more common and, in some cases, necessary. (Morgan Stanley observations)
• Analysts expect a rebound in M&A and private-capital-driven activity into 2025–2026, with AI-enabled transformations acting as catalysts for value-creation. Public-market activity remains active but selective, with notable IPOs on the horizon as conditions permit. (EY-Parthenon, McKinsey, PwC, Reuters)
• Retail access to private markets and blended fund formats are expanding exit options and improving liquidity pathways for diverse investors, not just large institutions. (Industry discussions and market reports)

Putting It Together: Why This Matters for You

• The exit landscape is evolving from a single “sell now” mindset to a strategy of staged optionality. You’ll still aim for optimal returns, but you’ll plan for a portfolio of credible exit routes that can be activated in response to market signals.
• By surfacing options early, you create a collaborative process with LPs, management teams, and potential buyers. You reduce scramble risk and increase the likelihood of a favorable outcome across different market regimes.
• The right approach is not to force a single path today, but to design governance, reporting, and communication that keep doors open and options live for tomorrow.

Mini-Checklist Preview What You Can Apply Right Now

• Map liquidity needs against four plausible exit paths: continuation-led, sponsor-to-sponsor, traditional sale/IPO, and mixed/portfolio-wide restructurings.
• Gauge asset fit using three criteria: time to liquidity, value-creation opportunities, and governance readiness.
• Prepare LP communications that articulate optionality, risk, and staged milestones.
• Build a lightweight internal playbook that lets you pivot quickly as market signals shift.

If the market tomorrow tilts back toward aggressive IPOs or accelerates corporate dealmaking, will your plan still feel actionable, or will you be scrambling for a single exit that may no longer fit? The path you choose today should empower tomorrow’s flexibility—and keep you prepared for the next pivot.

What’s your instinct: lock in a preferred exit now, or cultivate a resilient framework that embraces several doors?

Quick Case Snapshot How a Flexible Exit Mindset Plays Out

• In a diversified portfolio, a few assets with solid fundamentals and strategic potential might ride a continuation-fund path for 12–18 months to capture additional upside. Simultaneously, higher-visibility assets with stable cash flows could be prepared for a traditional sale or selective IPO when market windows align.
• A family of assets with cross-portfolio synergies might be reorganized under a sponsor-to-sponsor sale, enabling a new sponsor to unlock value through a refreshed operating blueprint while preserving upside for LPs.
• Across all scenarios, clear governance and LP communications keep expectations aligned and reduce friction when decisions pivot.

Closing Thought

Liquidity is no longer a single event but a choreography—timing, structure, and narrative all playing in sync. If you’re building the exits of tomorrow, which doors will you keep open, and who do you invite to walk through them with you? The next pivot will test more than math; it will test your readiness to iterate, communicate, and adapt in real time.

Key Summary and Implications

The exit landscape has evolved from a single, urgent sale into a choreography of options. Continuation funds and GP-led exits are now core liquidity engines, and aging portfolios push sponsors toward flexible, multi-path exits rather than binary decisions. The practical upshot: leadership must design governance, reporting, and conversations that preserve optionality across market regimes. In other words, the real value today is not picking one winner now, but keeping several viable doors open for tomorrow.

Beyond the numbers, this shift invites a broader view: value creation becomes an ongoing portfolio discipline, where timing, asset fit, and narrative align to unlock upside across cycles. If you map assets by their liquidity readiness, upside potential, and governance bandwidth, you’ll see four plausible channels—continuation-led, sponsor-to-sponsor, traditional sale/IPO, and blended portfolio restructurings—and you’ll learn to pivot between them as signals change. This isn’t about chasing a near-term exit; it’s about engineering a framework that can flex with the market.

Action Plans

1) Define liquidity milestones and metrics: set two to three explicit targets (e.g., 12–24 months, 3–5 years) with objective measures like IRR, DPI, or governance milestones, so you can orient decisions around real, trackable targets.
2) Asset-by-asset exit-fit assessment: rate each asset by time to liquidity, potential upside from continued holding, and governance readiness to support non-traditional exits. Create a lightweight scoring rubric to keep discussions objective.
3) Map exit routes with triggers: draft 3–4 scenario paths (continuation fund/GP-led, sponsor-to-sponsor, traditional sale/IPO, blended restructurings) and attach probability and trigger conditions (market windows, asset performance, governance bandwidth).
4) Build a governance and communications playbook: outline decision rights, sign-off thresholds, and LP/buyer narrative templates so plans feel coherent and repeatable, not reactive.
5) Develop direct, practical communications: LP notes explaining optionality, buyer-facing materials emphasizing portfolio rationale, and scenario-based storytelling that makes timing intelligible to diverse stakeholders.
6) Run a quarterly scenario refresh: rehearse 2–3 updates with management, LPs, and potential buyers to keep plans actionable and credible as markets shift.

Quick Asset-Category Lenses

• Tech/Software: emphasize continuation-path upside while preparing for selective IPO when visibility improves.
• Industrials/Manufacturing: leverage sponsor-to-sponsor opportunities for consolidation and efficiency gains.
• Healthcare/Biotech: pair near-term milestones with potential strategic partnerships or listings if regulatory/market windows align.
• Consumer Brands: use brand momentum to attract public-market or strategic acquirers when signals align.

Closing Message

Liquidity today is a choreography, not a door. The question isn’t simply where you’ll exit, but how you’ll keep doors open, how you’ll talk about optionality, and how you’ll move when the music changes. If you’re building the exits of tomorrow, which doors will you keep open—and who do you invite to walk through them with you? The next pivot isn’t just about math; it’s about readiness to iterate, communicate, and adapt in real time.

What’s your next move to turn flexible exits from concept into a practiced capability?