Private equity firms have been struggling to deliver on their core business model of taking on debt, buying companies and selling them for a profit. Several years of high interest rates have made it too expensive for many would-be buyers to purchase companies with debt, and private equity firms are contending with a backlog of more than 31,000 unsold companies, a record amount. Deal activity picked up toward the end of this year, but not enough to make a significant dent in the backlog. Continuation vehicles are providing a short-term solution by allowing firms to sell the companies to themselves, book a paper gain and wait for interest rates to improve.

 

Investors Warn of ‘Rot in Private Equity’ as Funds Strike Circular Deals

Buyout firms have struggled to sell companies they own and have instead found a workaround to get cash back to clients: Selling the companies to themselves.

By Maureen Farrell

Maureen Farrell covers the private equity industry from New York. This article is based on more than a dozen conversations with former and current employees of Clearlake, Wheel Pros and its advisers, many of whom spoke anonymously because they weren’t authorized to speak publicly. It also includes information from private documents.

Dec. 24, 2025