Origination for GP-led secondaries and continuation vehicles
Continuation fund deal sourcing: a practical guide.
Continuation fund deal sourcing gets treated as something that happens after the real work is done. A GP decides to run a continuation vehicle, hires a secondaries advisor to run the process, and origination barely comes up until an LP advisory committee asks where the assets in the new vehicle actually came from and why now. By then it is a defensive answer instead of a planned one, and a defensive answer is exactly what a skeptical LP is listening for.
This is written for GPs raising a continuation vehicle, independent sponsors weighing a single-asset continuation, and corporate development teams inside multi-platform funds who are being asked to help build the case for one. It covers how sourcing for a continuation transaction actually differs from sourcing a new buyout, where new assets can come from beyond the existing portfolio, and how to answer the origination question before an LP has to ask it.
What is a continuation fund, and where does sourcing fit into it?
A continuation fund is a new vehicle, usually raised alongside new LP capital, that buys one or more assets out of an existing fund so the GP can hold them longer while giving the original LPs the option to cash out or roll into the new vehicle. This is a form of secondary market transaction, just initiated by the manager rather than a limited partner. Sourcing fits in at two points most GPs conflate into one: the anchor asset, already inside the existing fund and therefore a portfolio decision, not a sourcing one, and anything added around it, whether that is a bolt-on for the anchor company or a second asset folded into a multi-asset vehicle. The second is where continuation fund deal sourcing actually starts, and it is the part most GPs have no repeatable process for.
How is continuation fund deal sourcing different from sourcing a new buyout?
It is different because the target is already known and owned, so the question shifts from "can we find and win this asset" to "can we prove this asset and anything added around it was sourced and valued on merit, not convenience." A new buyout lives or dies on finding a proprietary target before a competing bidder does, the problem proprietary deal flow is built to solve. A continuation transaction lives or dies on documentation: a clean valuation process and evidence that any add-on assets went through the same screening discipline the fund applies everywhere else, covered in acquisition target screening: a PE framework. Skip that discipline and it shows immediately in diligence, because there is no competing bid to point to as proof of price.
Can a GP add outside assets to a continuation vehicle, or only existing portfolio companies?
Yes, and this is where continuation fund deal sourcing starts to look like origination work rather than portfolio administration. Multi-asset continuation vehicles and strip sales increasingly pull in a bolt-on for the anchor company, or occasionally a second complementary platform, to give incoming LPs a growth story beyond a single aging asset. That bolt-on has to be sourced the way any add-on is sourced, the always-on target list and outreach effort add-on acquisitions: a buy-and-build sourcing guide describes, not a scramble triggered by the continuation timeline. A GP that only starts building that list once the process is underway is sourcing under a deadline, and it shows in both the price paid and the diligence file.
Why do LPs scrutinize continuation fund deal sourcing more than a primary deal?
Because the GP sits on both sides of the transaction, selling from the old fund and buying into the new one, so the deal depends on the market having actually tested the asset rather than the GP simply deciding what it is worth. LP due diligence on deal sourcing covers the broader version of this scrutiny across any fund, and it sharpens on a continuation deal because there is no arm's length seller to point to. An LP advisory committee wants a fairness opinion and, where the vehicle includes newly sourced assets, proof those went through the fund's normal screening process rather than being added because they happened to be available. Weak documentation here is one of the fastest ways an otherwise sound transaction stalls at the LPAC.
Can independent sponsors and smaller GPs run a continuation transaction without a large secondaries advisor?
Increasingly yes for smaller, single-asset deals, though the origination discipline still has to be there without a bank running the process. Independent sponsor deal sourcing covers how independent sponsors build proprietary pipeline without the infrastructure a large fund has by default, and a continuation transaction just narrows that same discipline onto one asset. What a smaller sponsor cannot skip is the fairness opinion, because without a large advisor running a competitive process, the sponsor has to show the same evidence some other way, which depends on the sourcing side already being clean.
| New buyout origination | Continuation fund deal sourcing | |
|---|---|---|
| What is being found | A new, previously unowned target | Add-on or bolt-on assets around an already-owned anchor |
| Main risk | Losing the deal to a competing bidder | Proving the price and process to a skeptical LPAC |
| Core evidence needed | A proprietary, off-market relationship | A fairness opinion plus a documented sourcing and screening trail |
| Timeline pressure | Set by the seller's process | Set by the continuation vehicle's close date |
| Who has to be convinced | The seller, to pick this buyer | The LP advisory committee, to approve the transaction |
What does an origination programme look like alongside a GP-led secondary process?
It looks like the fund's normal target list and outreach discipline, run early enough that any add-on has a real sourcing history by the time the secondaries advisor starts the process, not a scramble that begins after the transaction is announced. Holding company acquisitions: a sourcing playbook describes the closest analogue: a permanent-capital buyer running always-on origination against a long-term thesis rather than deal-by-deal. A continuation vehicle is the same shape, a long-hold asset that still needs a live pipeline of adjacent opportunities, whether or not every one ends up inside the vehicle itself.
How do you source add-on assets to strengthen a continuation vehicle before close?
The same way any centralized origination effort works: a defined target list built against the anchor asset's actual acquisition criteria, direct outreach to owners rather than waiting on inbound broker lists, and a documented record of who was contacted, when, and why each one fit or did not. Portfolio company deal sourcing: 3 models compared lays out the structural options for running that centrally versus platform by platform, and the same choice applies here: a fund running several continuation processes over time benefits from one shared origination engine rather than rebuilding target-list infrastructure each time. That infrastructure matters more now than it used to, since add-ons already make up roughly three-quarters of buyouts, and a continuation vehicle's add-on is subject to the same LPAC scrutiny as any other. What matters most for the continuation use case is the paper trail, since that trail is what turns a rushed-looking addition into a defensible, well-sourced one.
A framework for running continuation fund deal sourcing alongside a secondary process
- 1. Separate the anchor asset from anything new before the process starts. The anchor is already owned and does not need sourcing; anything new added to the vehicle does, and treating the two as the same problem is what produces a thin diligence file.
- 2. Start the target list for any add-on before the secondaries advisor is engaged. A bolt-on sourced over months of ordinary outreach reads as strategic; one sourced in the six weeks before close reads as convenient.
- 3. Document the screening criteria applied to any new asset, in writing, before an offer is made. This is the single artifact an LP advisory committee asks for first, and it costs nothing to keep as you go.
- 4. Line up the fairness opinion and market check in parallel with sourcing, not after it. A clean valuation process and a clean sourcing trail need to arrive at the LPAC together, because either one alone invites the question the other should have already answered.
Conclusion
Continuation fund deal sourcing is not a bigger version of finding a new buyout target, and treating it that way is why the origination question so often gets answered late, under pressure, in front of an LP advisory committee that is skeptical by design. The anchor asset does not need sourcing. Anything added around it does, with the same target list, outreach, and documentation discipline a fund applies to any other acquisition, started early enough to have a real history by the time the process is public. Solutions and how it works cover how a managed origination programme builds and documents that pipeline, and results has the numbers a fairness opinion or LPAC memo can point to.
Key Terms Glossary
Frequently asked questions
What is a continuation fund in private equity?
A continuation fund is a new investment vehicle that buys one or more assets out of an existing fund, giving the GP more time to hold them and giving the original fund's LPs the choice to cash out or roll their stake into the new vehicle.
Is continuation fund deal sourcing the same as sourcing a new buyout?
No. The anchor asset in a continuation transaction is already owned, so sourcing only applies to any bolt-on or second asset added to the vehicle, and the central challenge shifts from winning the deal to documenting how it was found and priced.
Why do LPs ask so many questions about where a continuation deal's assets came from?
Because the GP is both the seller and, indirectly, the buyer, there is no independent party negotiating price the way an arm's length sale would provide, so the LP advisory committee relies on a fairness opinion and a documented sourcing and screening trail instead.
Can a continuation vehicle include assets outside the existing fund?
Yes. Multi-asset continuation vehicles and strip sales frequently add a bolt-on to the anchor company, or occasionally a second complementary platform, to strengthen the vehicle's growth story for incoming LPs.
Do independent sponsors run GP-led secondaries?
Smaller, single-asset continuation transactions increasingly involve independent sponsors, though the fairness opinion and documented market check still need to be in place even without a large secondaries advisor running the process.
When should sourcing for a continuation-related add-on start?
Before the secondaries advisor is engaged and well before the transaction is announced, so any newly added asset has a real acquisition history rather than looking like it was found to fit a deadline.
What documentation matters most for continuation fund deal sourcing?
A written record of the screening criteria applied to any new asset and when outreach began, since that is typically the first artifact an LP advisory committee requests when reviewing a continuation transaction.
How is a strip sale different from a single-asset continuation fund?
A strip sale moves several assets into the new vehicle at once, while a single-asset continuation fund carries just one company, though the sourcing discipline for any assets added around either structure is the same.