For a market that many predicted would loosen up by now, exits remain stubbornly difficult to engineer. Sponsors sitting on aging portfolio companies — some now well past their original hold-period targets — are increasingly turning to structures that would have looked unusual five years ago: continuation funds, structured minority sales, and dividend recapitalizations designed less to return capital outright than to buy time until conditions improve.

"There's a real tension right now between LP pressure to show distributions and the reality that strategic buyers are still cautious and the IPO window hasn't fully reopened," said one fund formation lawyer who works regularly with mid-market sponsors. "So managers are getting inventive about partial liquidity rather than waiting for the perfect full exit."

Continuation vehicles have become the most visible expression of that creativity. Rather than selling a high-performing but not-yet-mature asset outright, sponsors are increasingly rolling it into a new fund vehicle, often backed by a mix of existing LPs and new secondary capital, that allows the original fund to return proceeds to investors while the sponsor retains upside in the asset. The structuring work involved is far from trivial — fairness opinions, conflict-of-interest protocols, and LP advisory committee approvals have all become standard features of these deals rather than optional extras.

Dividend recapitalizations have also seen a resurgence, particularly among portfolio companies with stable cash flows but limited appetite among buyers for a full change of control. By layering additional debt onto a company's balance sheet to fund a special dividend back to the sponsor, managers can generate partial distributions without giving up the asset — though lenders have grown more selective about which credits they're willing to support this way, and leverage covenants have tightened accordingly.

Structured minority sales round out the toolkit. Rather than selling 100% of a portfolio company, sponsors are increasingly willing to sell a meaningful minority stake to another institutional investor, often a different PE fund or a strategic with adjacent interests, while retaining control and a path to a fuller exit later. These deals require careful negotiation of governance rights, drag-along and tag-along provisions, and — critically — clear documentation of how a future full exit would be triggered and priced.

What ties these approaches together is a shared premise: liquidity doesn't have to mean a clean, total exit anymore. Advisers note that LPs, while still pushing for distributions, have grown more receptive to these partial solutions than they might have been a few years ago, provided the economics and governance protections are clearly explained upfront.

The open question is how long this period of structural creativity lasts. Several deal professionals suggested that if strategic and IPO markets reopen meaningfully in the next year, much of this activity could prove to be a temporary bridge rather than a lasting shift in how exits get done. Others were less convinced, arguing that LPs have now seen the flexibility these structures offer and may keep demanding them even once traditional exit routes become easier again.