To play devil's advocate, the reason a private equity firm should use a continuation is that it wants to hold an asset past the fund's 10-year life because the asset is continuing to perform very well. 10 years ago, many private equity firms felt heartburn from letting big software winners go after 5 years because that's the typical fund cycle.

In reality, LPs and GPs would have been better off reliably holding the same growing asset for 15-20 years as the company went from $10M in EBITDA to $250M. Why take a 3x in 5 years when you can get a 25x in 15 years? The annual compounding works out to be roughly the same. The only issue is your fund structure so you trade it amongst yourself every 3-5 years at a 3-4x mark that makes you look good to your investors. The growth is usually there so it is not a lie though liberty may be taken with multiples which expanded rapidly over the last decade.

This phenomenon has been used aggressively, perhaps too aggressively, in software and particularly software roll-ups where you can comfortably compound 20-30% EBITDA growth annually between 10-15% organic growth (half or more of which is just price increases) and an aggressive M&A strategy that drives higher margins.

That said, this article is raising an early and important alarm bell to the broader public, who have a vested interest because their pensions are invested in these firms, that certain firms may be using it too aggressively. When I scan the broader PE landscape, the firm that has used it to the most success is Clearlake Capital. I don't have insight into their whole portfolio but have heard criticisms that they overuse it. Or that their is incestuous trading of assets between them, TA Associates, Hg, Insight Partners, FP, Thoma, and a handful of others.