Private equity fund managers in Korea are increasingly adopting Continuation Vehicles (CV) as an exit strategy, with notable transactions including Han & Company's 2022 Ssangyong C&E deal worth approximately 1.9 trillion won and CVC Capital's 2025 transaction for online travel platform Yeogieoddae. The trend has accelerated due to difficulties in traditional exit routes, as IPO market downturns and M&A transaction contractions have made investment recovery challenging for PE funds. CVs allow fund managers to extend asset holding periods by transferring investments from maturing funds to new investment vehicles, providing liquidity options for existing limited partners while enabling continued investment for those seeking longer exposure. Industry observers describe CVs as a 'fourth exit method' alongside traditional routes of initial public offerings, mergers and acquisitions, and dividend distributions, though concerns about transaction pricing fairness and potential conflicts of interest remain central issues in CV structuring.
Continuation Vehicles Extend PE Fund Asset Holding Periods
A Continuation Vehicle refers to a transaction structure where private equity fund general partners (GPs) transfer investment assets held in existing funds to new investment vehicles to extend holding periods. PE funds primarily utilize this structure when fund maturity approaches but asset values are expected to appreciate further. The mechanism provides existing limited partners (LPs) with opportunities to recover their investments while allowing LPs seeking continued exposure to retain assets through the new investment vehicle.
Typical CV structures involve transferring assets held by existing funds to separate investment vehicles, with participation from both new investors and existing LPs. Recent market practice has expanded the CV definition to include GP-led transactions where new LPs are recruited to purchase existing LP stakes without transferring underlying assets. This broader interpretation encompasses any GP-led transaction extending asset holding periods beyond original fund terms.
IPO Market Downturn Drives CV Adoption in Private Equity
Traditional private equity fund exit methods consist of three primary routes: initial public offerings (IPO), mergers and acquisitions (M&A), and dividend distributions. However, recent IPO market stagnation and M&A transaction contraction have complicated investment recovery for fund managers, driving rapid growth in CV utilization. The structure enables GPs to avoid rushed asset sales while providing liquidity to existing LPs and securing additional time for enterprise value enhancement, earning CVs the designation as a 'fourth exit method' in the private equity industry.
The growing reliance on CVs reflects structural challenges in traditional exit markets, where public offering windows have narrowed and strategic buyer appetite has weakened. Fund managers facing maturity deadlines with portfolio companies not yet optimally positioned for sale have turned to CV structures as a bridge solution, allowing continued value creation efforts without forcing premature exits at potentially discounted valuations.
Han & Company Introduced Korea's First CV Transaction in 2022
Han & Company pioneered the Continuation Vehicle structure in Korea's private equity market in 2022 with a transaction involving Ssangyong C&E valued at approximately 1.9 trillion won. The transaction was evaluated as the largest CV deal in Asia at the time, marking a significant milestone in Korea's PE fund management practices. Following this precedent, CVC Capital conducted a CV transaction for online travel platform Yeogieoddae in 2025, demonstrating growing adoption of the structure among Korean fund managers.
These early Korean CV transactions established operational frameworks and market acceptance for the structure in the domestic private equity industry. The Ssangyong C&E deal's scale and successful execution provided a reference point for subsequent transactions, while the Yeogieoddae case illustrated CV applicability across different industry sectors and fund strategies in the Korean market.
Independent Valuation Addresses CV Pricing Concerns
Transaction pricing appropriateness and conflict of interest issues constitute major concerns in CV structures. Since GPs transfer assets from existing funds to new investment vehicles they also manage, asset valuation fairness and interest alignment between existing and new LPs are critical considerations. International market practice typically requires independent valuation agency assessments and LP advisory committee (LPAC) approval processes to address these concerns.
The governance framework for CV transactions emphasizes third-party oversight to mitigate potential conflicts inherent in GP-led secondary transactions. Independent valuation provides objective asset pricing benchmarks, while LPAC review ensures existing investor interests receive appropriate consideration in transaction structuring. These safeguards have become standard practice in developed PE markets and are increasingly adopted in emerging CV markets including Korea.
FAQ
What is a Continuation Vehicle in private equity fund management?
A Continuation Vehicle is a transaction structure where private equity fund general partners transfer investment assets from existing funds to new investment vehicles to extend holding periods beyond original fund maturity dates. The structure is primarily used when fund maturity approaches but asset values are expected to appreciate further, providing existing limited partners with liquidity options while allowing continued investment through new vehicles.
Why are private equity funds in Korea increasingly using Continuation Vehicles?
Korean private equity funds are adopting Continuation Vehicles due to difficulties in traditional exit methods, as IPO market downturns and M&A transaction contractions have complicated investment recovery. CVs enable fund managers to avoid rushed asset sales while providing liquidity to existing investors and securing additional time for enterprise value enhancement, earning designation as a 'fourth exit method' alongside IPOs, M&A, and dividends.
What was Korea's first Continuation Vehicle transaction?
Han & Company conducted Korea's first Continuation Vehicle transaction in 2022 involving Ssangyong C&E, valued at approximately 1.9 trillion won. The transaction was evaluated as Asia's largest CV deal at the time and established a precedent for subsequent Korean market adoption of the structure.
