PE firm New Mountain Capital owned a medical marketing company called Real Chemistry for 6 years…
They ran the typical PE playbook of buying a business… growing it… and then eventually selling it.
Now usually when you sell a business… there’s a buyer involved
But what New Mountain did was unique…
Because instead of selling Real Chemistry to another company…
They sold it to themselves!
You see, New Mountain created a “continuation fund” and sold Real Chemistry to this new fund for $3 billion.
So the buyer was New Mountain Capital and the seller was also New Mountain Capital.
They literally sold a company to themselves and called it an “exit.”
But here’s the genius part... about 80% of their original investors chose to cash out, earning 4x their money. These investors think they just had a successful exit and are happy with their returns.
Meanwhile, New Mountain keeps the company, resets their fee structure, and gets to charge management fees all over again on the same asset.
They even raised $3.05 billion from new investors to fund this transaction.
Half went to pay out the old investors, and half will be used to grow the business further...
So New Mountain gets to keep their best asset... collect new fees... and their original investors got a great return.
It’s like selling your house to yourself… paying off your old mortgage with money from a new mortgage… and then charging yourself rent to live in the same house.
This isn’t some isolated incident either...
In fact... sales to continuation funds accounted for a record 14% of private equity exits globally in 2025, up from 5% in 2021.
The industry has figured out that instead of actually selling their best companies, they can just shuffle them between their own funds and keep collecting fees forever.
The original investors get their money back and think everything is fine.
The new investors think they’re buying into a proven winner. And the private equity firm gets to double-dip on fees.
Financial engineering at its finest.
And it’s exactly why I don’t invest in private equity funds or most alternative investments.
Because largely, the fee structures are designed to enrich the managers rather than us investors.
You’re better off buying quality public companies where you don’t have to worry about getting shuffled between different funds every few years.
The stock market might be volatile, but at least it’s honest about what it is.
Private equity meanwhile… has become a fee extraction machine disguised as an investment strategy.
Oliver