Calpine’s $16.4bn sale highlights growing role of mega-exits in private equity

The $16.4bn sale of Calpine Corp to Constellation Energy underscores the rising significance of mega-exits in private equity.

This landmark deal, which provides a 4x return for its owners—Energy Capital Partners (ECP), CPP Investments, and Access Industries—is among the largest transactions in the U.S. power industry in nearly two decades. It also offers ECP the opportunity to distribute cash to its limited partners, liquidating a significant portion of its $5bn third fund.

Such mega-deals are increasingly critical as private equity firms navigate a slow exit environment. Between 2020 and 2024, only 27 U.S. private equity transactions exceeded $10bn, including GTCR and Apax Partners’ $13.45bn sale of AssuredPartners and Home Depot’s $18.25bn acquisition of SRS Distribution. These large transactions provide a more efficient method of returning capital compared to multiple smaller exits.

John Grand, co-head of corporate practice at Vinson & Elkins, notes that conditions in 2025 could favor dealmaking. “Public equities feel overvalued, interest rates are dropping, and political stability is providing predictability,” he said. The hope is that an increase in such deals could accelerate distributions and address pressure from LPs to improve Distributions to Paid-In Capital (DPI), a key performance metric.

Aaron Cohen of GTCR, which earned 2.5x its investment in the AssuredPartners deal, highlighted the value of all-cash exits for LPs. However, Bill Nelson of A&O Shearman cautions that mega-deals remain rare, describing them as “Goldilocks transactions” that require a perfect set of conditions to execute.

Despite their challenges, mega-exits like Calpine’s sale represent a crucial tool for private equity firms seeking to recycle capital and meet investor expectations in a highly competitive market.

Source: Reuters

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