The argument of this piece, stated up front. Whatever else a continuation vehicle is, it is a sale — priced by outside investors who have no history with the asset and who know the sponsor sits on both sides of the trade. The portfolio company arrives at that conversation with four years of reporting built for somebody else entirely, and the difference between the two shows up in the price. Closing that gap is real work, it has to happen before the process opens, and it is nobody's job: not the banker's, not the quality of earnings provider's, not the sponsor's deal team's, and not, realistically, the CFO's while he is also running the business.
That last point is where and why a firm like Stratis Group LLC gets hired to help. I will come back to it at the end.
Why this matters now
Exit activity waned again through the first half of 2026, S&P Global reported in August, despite mounting pressure on fund managers to realize portfolio investments. Holding periods now run past six years. And according to Allianz Trade, the share of limited partners naming DPI as their most important metric climbed from 8% to 21% in three years, while the share naming IRR fell from 42% to 35% — a quiet but complete shift from paper marks to money actually returned.
Sponsors have responded with the instruments available, and the scale is no longer marginal. Evercore's review of the first half of 2026 puts it plainly:
The instrument that was a niche a decade ago — GP-led deals were under a fifth of secondaries volume in 2014, on Evercore's numbers — is now the majority of the largest secondaries market on record. Sponsors are using it to generate distributions while holding on to assets they are not willing to sell into this market.
This is usually framed as financial engineering, and there is a live argument about whether it defers a reckoning or manages one. That argument is worth having. It is also not the one that matters most to the person who has to execute the transaction — because the engineering happens at the fund, and the underwriting happens at the portfolio company.
The buyer is real, and skeptical by design
A continuation vehicle moves an asset out of a fund at the end of its life into a new vehicle funded by secondaries investors, with existing LPs choosing cash or a roll. The sponsor stays. The company carries on. From inside, it can look like an administrative event.
It is not. The price is set by outside investors who have no history with the business, who know the sponsor sits on both sides of the trade, and whose entire professional discipline is pricing that conflict. The market has built defenses around exactly this problem — competitive processes, fairness opinions, LP advisory committee consent — and every one of them exists because the buyer is presumed to need protection.
The practical consequence is that a secondaries buyer diligences harder than a trade buyer, not more softly. Anything that looks unexamined does not read as an oversight. It reads as a possible concession, and it gets priced accordingly.
Anything that looks unexamined does not read as an oversight. It reads as a possible concession.
What the company brings to that conversation
Four years of excellent reporting that was built for something else.
Every PE-backed company reports continuously. It files a monthly package to its sponsor. It delivers compliance certificates and covenant calculations to its lenders. Its numbers roll up into fund reporting and quarterly valuation marks. None of this is casual, and none of it is what a secondaries buyer needs.
Lender reporting tests compliance against a fixed standard. It answers whether leverage sits under the covenant. It never asks why gross margin mix moved, or whether the top ten accounts renew at the rate they did three years ago.
Fund reporting is written by the sponsor, aggregated across the portfolio, and centred on valuation. The company neither authors it nor is examined by it.
The monthly package is the richest of the three and carries the subtlest problem. It is built by the portfolio company CFO for a deal partner who has sat on the board for five years. It can be thin in precisely the places where shared context does the explaining — and nobody notices, because the board conversation fills the gap.
Portfolio monitoring, whether it runs on a purpose-built platform or a package assembled by hand each month, exists so a sponsor can compare Company A to Company G. Standardization is the point. It is also the problem: standardization strips out company-specific texture so that numbers roll up cleanly, and company-specific texture is exactly what an equity buyer underwrites. Nobody prices a business off a comparable metrics grid. They price it off why this company's retention behaves the way it does.
A sponsor can have genuinely excellent monitoring discipline and a portfolio company that is thoroughly measured and entirely unprepared to be sold. Those are not in conflict. The monitoring is doing its job. It was never doing this one.
The gap is a translation, not a failure
The material a secondaries buyer wants is a different document: segment-level economics, cohort retention and churn, pipeline conversion, customer concentration with renewal dates attached, an EBITDA bridge in which every adjustment is defended by a person who can be cross-examined, and a forecast history someone is willing to show.
Most of that has never been assembled, because for four years nobody who mattered needed it in that shape.
The tell is the sell-side quality of earnings. A company held five or six years has usually not had one since entry diligence. Commissioned for a continuation vehicle, it routinely surfaces adjustments the sponsor was carrying informally and the buyer has never seen — and those get renegotiated late, in a process where the buyer already assumes the seller is conflicted.
The discount that follows gets recorded as market conditions. Some of it is preparation.
What it costs, and when
The expensive version of this is the ordinary one. The process opens, the buyer's questions arrive, and the company builds the answer while being asked. That takes weeks of CFO and CEO time at exactly the point when the operating plan can least afford to lose either of them, and it produces answers that arrive late and defensive — the worst possible register in a transaction where the buyer is already discounting for conflict.
The alternative is unglamorous. Build the underwriting case before the process opens. Find the uncomfortable items yourself. Get the forecast history in order, stress the covenant and working capital views against the real operating plan rather than a generic haircut, and put the sell-side quality of earnings in front of your own team before it goes in front of a buyer's.
None of that is about presenting better. It is about being the seller who has already asked the questions the buyer is about to ask — which, in a market where the buyer is structurally skeptical of you, is worth more than it used to be.
Which raises the awkward question of who does it
Look at the cast assembled around a continuation vehicle and the gap is visible.
The banker runs the process. He markets the asset, manages the buyer list, and drives to a price. He is not going to spend six weeks inside the general ledger reconstructing three years of forecast variance.
The quality of earnings provider audits the numbers he is given. That is a verification exercise, and a valuable one, but it starts from the company's existing position rather than building a new one. A QoE tells you whether an adjustment holds. It does not tell you which adjustments you should have been making.
The sponsor's deal team knows the asset better than anyone. They are also the seller, and in a GP-led transaction that is not a background fact — it is the specific thing the buyer is pricing against. Work product authored by the party on both sides of the trade carries a discount before anyone reads it.
The portfolio company CFO is the right person and usually the wrong one to do it alone, for two reasons that have nothing to do with capability. The first is time: this is weeks of work landing precisely when the operating plan cannot afford to lose him, and the operating plan is what the buyer is underwriting. The second is subtler. He built the reporting that has the gap in it, for a reader who shared his context. Asking him to find what is missing is asking him to notice the thing his own fluency conceals — which is genuinely difficult, and not a criticism of anyone.
Everyone in the room is doing their job. None of their jobs is this one. The work of turning four years of monitoring into a case a skeptical buyer will underwrite sits in a gap in the org chart, and it usually gets done in the middle of the process, by whoever has capacity, under time pressure.
What closes it is not another advisor alongside the company. It is someone in the finance seat, before the process opens, who has been on the answering end of diligence and knows which questions arrive in week two rather than week eight — working with the CFO rather than around him, so that the person who has to defend the numbers is the person who has already been cross-examined on them.
That is unglamorous work, and it is the difference between a valuation discount attributed to market conditions and one that was actually caused by them.
This is the gap Stratis Group works in. I take the finance seat inside a portfolio company through a capital event — a refinancing, a covenant reset, an acquisition financing, or the preparation that precedes a continuation vehicle or recapitalization. Build the case the counterparty will actually test, surface the uncomfortable parts before diligence finds them, and carry the process through to close, so the CEO and CFO stay on the operating plan the buyer is underwriting.
If a portfolio company is heading into one of these, twenty minutes is usually enough to tell whether it is useful.
jon@stratisgroupllc.com