Private Capital Powers New Era Of Megadeals

In Brief:

Private capital markets are fundamentally reshaping how the world's largest transactions get financed and exited, enabling deals that would have been impossible under traditional banking models while creating new challenges around liquidity and monetization for sponsors sitting on $3.9 trillion in unrealized portfolio value. Three senior executives—Anu Aiyengar, Global Head of Advisory & M&A at J.P. Morgan; Christina Minnis, Global Head of Credit & Asset Finance and Head of Global Acquisition Finance at Goldman Sachs; and May Nasrallah, Executive Chairwoman of PJT deNovo—discussed the private markets revolution during Bloomberg's Women, Money & Power 2025 event in London. Their conversation revealed how the convergence of public and private credit has unlocked financing capacity for $55-70 billion LBO transactions, why private equity firms are developing sophisticated partial exit strategies beyond traditional IPOs to address mounting distribution pressure, how Middle Eastern sovereign wealth funds have evolved from passive limited partners into strategic operators deploying equity checks worth billions, and why companies staying private longer due to S&P 500 scale requirements has created a self-reinforcing cycle favoring private capital over public markets.

Big Picture Drivers:

• Credit Market Convergence: Private credit has expanded from non-investment grade sponsor-backed lending into investment grade corporate financing, creating trillions in capital pools that combine with traditional syndicated markets to enable single-B LBOs raising over $20 billion in debt and double-B transactions potentially reaching $65-70 billion in total value

• Exit Innovation Imperative: With $3.9 trillion in unrealized private equity portfolio value—three times the $1.3 trillion in undeployed dry powder—sponsors are developing creative monetization strategies including secondaries, continuation funds, strategic financing solutions, and partial exits that allow value realization without full ownership transfer

• Sovereign Strategic Capital: Middle Eastern sovereign wealth funds managing hundreds of billions in petrodollars have transformed from passive institutional investors in private equity funds into active strategic operators making multi-billion dollar direct equity investments aligned with national diversification agendas away from oil dependence

• Private Company Scale Requirements: The minimum company size for S&P 500 inclusion has increased from $3 billion in 2008 to $18 billion in 2024, creating structural incentives for companies to remain private longer and accumulate scale through private capital financing before considering public markets

Key Themes:

• Private Credit Infrastructure: Goldman Sachs' Capital Solutions Group exemplifies how banks are building off-balance-sheet structures that pool capital from their own asset management platforms alongside firms like Blackstone, KKR, and Apollo to deploy billions in equity capital for infrastructure projects, with a recent $7 billion financing for an LNG project demonstrating the scale now possible through private structures

• Exit Creativity Over IPO Dependence: Private equity firms have moved beyond the binary choice of IPO versus full sale, developing sophisticated partial monetization strategies that include selling minority stakes to strategics, using continuation vehicles to provide LP liquidity while retaining ownership, and leveraging secondary markets that have emerged as a major exit alternative for sponsors managing long hold periods

• Regional Private Capital Ecosystems: Middle Eastern private equity deployment has shifted from exclusively outbound to increasingly regional, with firms like KKR making repeat infrastructure investments in Adnoc pipelines, Permira taking stakes in local technology companies like Property Finder, and Carlyle, Warburg Pincus, TPG, CVC, and Brookfield all actively deploying capital across multiple sectors in the Gulf region

• Private Market Functioning Requirements: Even as companies stay private longer and private capital grows, functioning IPO markets remain critical infrastructure for private equity—September 2025's strongest equity capital markets opening since 2010 with sponsor IPOs all trading well provides essential confidence for firms making large equity commitments knowing public exit optionality exists even if most realize returns through strategic sales

Key Insights:

• Financing Capacity Ceiling: The convergence of traditional syndicated lending and private credit markets has pushed the upper bounds of financeable LBO transactions to $55-60 billion for single-B rated companies and potentially $65-70 billion for double-B credits, enabled by trillions in private capital pools that didn't exist a decade ago and banks' willingness to partner with private credit providers who can hold long-dated paper on their balance sheets.

• Unrealized Value Drives Innovation: The private equity industry's $3.9 trillion in unrealized portfolio value—three times larger than the $1.3 trillion in undeployed dry powder—creates more immediate pressure and opportunity than fundraising challenges, driving innovation in hybrid capital structures, continuation vehicles, fund financing solutions, and secondaries that allow sponsors to provide distributions while retaining ownership of assets still generating strong returns.

• Sovereign Strategic Evolution: Middle Eastern sovereign wealth funds have fundamentally reconceived their role from passive LP capital allocators into active strategic operators, with transactions like PIF's multi-billion dollar EA Sports equity check representing deliberate portfolio construction aligned with national diversification into sports, entertainment, and gaming rather than traditional financial optimization, creating a new category of patient strategic capital distinct from both financial sponsors and corporate acquirers.

• Scale Barrier Reinforces Private Markets: The increase in minimum S&P 500 inclusion size from $3 billion to $18 billion over sixteen years creates a structural barrier requiring companies to achieve massive scale before becoming relevant to index investors, forcing businesses to rely on private capital for longer growth phases and reinforcing the private markets ecosystem by ensuring a continuous pipeline of companies that need private financing solutions.

• Credit Compression Despite Opportunity: Private credit spreads have compressed significantly alongside public investment grade markets trading near all-time tights, creating valuation concerns even as macro fundamentals suggest continued economic resilience, but the emergence of AI-driven infrastructure financing—particularly energy transition projects for data centers with investment grade counterparties and resilient structures—offers compelling new deployment opportunities for private credit capital.

• IPO Optionality Enables Private Equity: Despite less than 20% of KKR exits occurring through public offerings, the functionality of IPO markets remains essential for private equity dealmaking because sponsors making $20+ billion equity commitments in megadeals need confidence they can access public markets if needed, even though most portfolio companies will ultimately be sold to strategic buyers or other financial sponsors rather than taken public.

Memorable Quotes:

• "If you were going to expand that horizon to maybe a double B type credit rating, I think you're talking 60, 65, $70 billion of transaction value could get done with strong credit markets across private and public." - Christina Minnis, outlining the unprecedented financing capacity created by converged public and private credit markets before the $55 billion EA Sports LBO closed

• "The latest figure that we saw, it was 1.3 billion of the so-called dry powder in the private equity space. What's fascinating to us is that the amount of capital of unrealized value is three times that." - Natalia Tsitoura from prior panel, highlighting how the $3.9 trillion in portfolio company value creates more immediate opportunity than undeployed capital for creative financing structures

• "The sovereign wealth funds have realized that they have substantial amount of petrodollars coming into their coffers and they have at the same time decided to diversify more meaningfully away from oil and gas domestically, so a lot of what you're seeing them do is really taking action for their own agenda." - May Nasrallah, explaining the fundamental shift from passive institutional allocation to strategic national agenda execution

• "If you look at the S&P 500 inclusion, in 2008 the size of a company was 3 billion to be included, in 2024, 18 billion. That's a pretty dramatic change in scale that is needed, which means you need to get your company big enough before you become relevant in the market for index inclusion." - Anu Aiyengar, articulating the structural driver keeping companies in private markets longer

• "The other thing that we're seeing globally is the emergence of secondaries as another alternative to exits for private equity firms. And I think that is a wave that will continue for a while to come." - May Nasrallah, describing how continuation funds and secondary transactions have become mainstream exit solutions rather than distressed alternatives

The Wrap:

The private capital markets have reached an inflection point where they're no longer simply an alternative to public markets but increasingly the preferred venue for both financing and ownership, enabled by unprecedented pools of patient capital from private credit providers, sovereign wealth funds, and institutional investors willing to accept illiquidity in exchange for returns. The convergence of public and private credit has unlocked financing capacity for transactions that dwarf previous LBO records, while the $3.9 trillion in unrealized private equity value is driving sophisticated exit innovations beyond the traditional IPO-or-sale binary. Middle Eastern sovereign capital has evolved into a distinct category of strategic operator rather than financial investor, while structural barriers to public market relevance keep companies private longer and reinforce the ecosystem. The central tension remains between sponsors' need to provide liquidity and distributions to investors while retaining ownership of assets still generating strong returns—a challenge being addressed through continuation vehicles, secondaries markets, and creative financing structures that may ultimately redefine what "exit" means in private equity.