All of this has slowed strategic M&A. In 2023, global M&A recorded its lowest level in a decade, underscoring the post-pandemic slowdown in dealmaking. Global PE exit count declined to 3,796 from the 2021 peak of 4,383. While off its highs, global PE dry powder is still around $2.5 trillion as of mid-2025, and the pressure to deploy capital remains high even as exit channels tighten. Several forces underpin the recent proliferation. Among them: a lack of traditional exit paths, a looming maturity wall, and a need for LPs to free up cash.
First, rising financing costs have constrained leveraged buyouts and widened the bid-ask gap in M&A deals. Continuation funds allow managers to retain high-conviction assets and provide investors with liquidity options. The impending maturity wall is another factor. More than 50% of PE funds are now six years or older, with 1,607 funds set to wind down in 2025 or 2026. Continuation funds allow firms to extend value creation without forced sales.
Finally, these funds align with investor demand for flexibility. LPs can exit for immediate liquidity or roll over to chase future upside. New investors gain exposure to proven assets with lower blind-pool risk. Continuation funds boast a 9% loss ratio compared to 19% for buyouts, offering better risk-adjusted returns.