In late 2025, CVC Capital Partners tested the market for German packaging machinery maker Syntegon at a valuation of more than €4 billion and concurrently explored a Zurich listing. Neither option panned out.

This March, it sold a 37 percent structured equity stake to Apollo Global Management and raised additional debt financing to help fund a shareholder payout of around €550 million.

Acquired from from Robert Bosch in early 2020, Syntegon is one recent example of how sponsors are finding workarounds to fund distributions in the absence of traditional exits. The latest strategy gaining popularity is the use of structured equity financing.

The arrangements vary, but typically involve preferred stock with no maturity date and a fixed dividend ranking ahead of common. Terms frequently include dividends that ratchet higher over time, rights to force an exit later, downside protection if performance slips, conversion into common under pre-specified conditions, and governance rights.

Agreements are made between a sponsor and one or more capital providers, who invest through strategies like Apollo's hybrid debt-equity fund. Other frequent participants include Blackstone, Sixth Street, and Goldman Sachs Asset Management, among others.

These instruments are being priced with yields in the mid-teens, compared to the single-digits for the same issuer's debt.

For the sponsor, they get funding that sits outside of the asset's credit agreement and leverage calculations, no maturity date, and more time to find a final exit.

"There's a large and growing universe of companies that have been owned by the same private equity firm for six years or so, with positive growth trajectories but with too much leverage to borrow more cash in conventional ways," Ranesh Ramanathan, who leads the capital solutions practice at DLA Piper, told Bloomberg. "It's this group that these investors are targeting."

Another example is Power Home Remodeling's deal in May to raise of $450 million of redeemable preferred equity and $1.2 billion of convertible securities from Bain Capital, Sixth Street, and the structured-capital arm of Harvest Partners, according to S&P Global Ratings, alongside a dividend recap. Harvest's private equity arm, the existing owner, returned cash to LPs while keeping its stake.

While distributions are one of the driving factors, not all LPs are appreciative of these deals. A late-2025 ILPA survey found that 60 percent of respondents would rather prioritize longer-term returns over near-term liquidity.

To minimize the hit to an asset's returns, sponsors pursuing these deals are signing up for a more rigid timeline. With ratcheting dividends, the clock is ticking to exit before the instrument's preferred starts to accrue faster than the underlying business compounds.

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