M&A dealmaking in the US power industry is surging, with investors moving to consolidate a fragmented industry and scale as power demand increases.
The total value of all M&A activity in the US energy sector exceeded US$103.4 billion in 2025, an almost threefold increase from the prior year (US$38.1 billion) and the highest annual total on Mergermarket record.
Several major deals have been announced so far in 2026. In January, Texas-based power generator Vistra agreed to acquire Cogentrix Energy, comprising 10 natural gas-fired power plants, in a US$4.7 billion deal. Also, in January, Houston-based Talen Energy announced its agreement to acquire three power generation assets in Ohio and Indiana from Energy Capital Partners in a deal worth almost US$3.5 billion. In March, LS Power Equity Advisors agreed to acquire a power generation portfolio—comprising 4.4 gigawatts of predominantly natural gas-fired generation capacity in Delaware and Pennsylvania—from Constellation Energy for US$5 billion.
Data centers drive dealmaking
A key contributor to the consolidation in the power industry has been the increase in data center projects, as hyperscalers (global technology companies with large digital infrastructure asset portfolios) invest heavily in new computing capacity for AI technologies. McKinsey forecasts show data center spending climbing to around US$1.7 trillion globally by 2030.
These data centers require hundreds of megawatts of energy to run. The Bank of America Institute expects the US power grid to see an extended period of load growth, with demand forecast to increase at a 2.5% compound annual growth rate (CAGR) through 2035, compared to just 0.5% CAGR between 2014-24.
This demand-led growth has increased power company valuations. The Dow Jones US Utilities Index showed a one-year return of around 16% on May 5, 2026, while research from Enervus shows M&A valuations for natural gas-fired power stations doubling from 2024 levels. This has supported high volumes of M&A in the sector.
Power companies and private equity sponsors have deep pockets and access to third-party capital. They possess the resources to meet high asking prices for assets, while strong growth forecasts give them the confidence to transact. Power companies and other players in the power sector are increasingly considering M&A, whether as a tool to accelerate AI-linked growth or as a way to defend against potential acquirers by preemptively building their asset portfolio.
M&A boom boosts leveraged investors
For leveraged finance investors, M&A in the power sector has been a welcome source of consistent deal flow.
In 2025, leveraged loan borrowing and high yield bond issuance for M&A and buyouts in the US energy industry was up more than 40% year-on-year, reaching US$21.2 billion. Issuers coming to market have been well received, with financings frequently oversubscribed and priced at attractive rates.
Investors have been eager to support consolidation plays. These deals have provided consistent new money financing opportunities in a market that, in recent years, has been dominated by refinancing activity.
Strong investor support for power deal financings has enabled companies and sponsors to fund these transactions through incremental term loans, new credit facilities and high yield bonds. The surge in power prices has greatly increased the EBITDA of power companies and allowed them to obtain larger revolving credit facilities and letter of credit facilities from their lenders.
Power companies and sponsors that are participating in this M&A boom—building on stronger credit profiles due to their larger asset bases, increased revenue and EBITDA—have also taken the opportunity to negotiate better pricing or other improvements. For example, if a borrower reprices a term loan, the pricing on a revolving credit facility in the same credit agreement would traditionally be unaffected unless a deal is separately negotiated with the revolving lenders. But with current market conditions favoring power companies, a number of companies have been able to get their revolving lenders to include an auto-ratchet feature, where revolver pricing automatically adjusts to match any repricing of the term loan (subject to a 50 basis point differential).
Building new capacity
Looking ahead to the next 12-24 months, there is a runway for additional industry consolidation. Demand for power generation infrastructure is rising, with large amounts of capital required to bring new capacity online as well as to upgrade or replace aging infrastructure.
The long-term growth trajectory for power consumption in the US makes the opportunity for M&A too compelling to ignore for many dealmakers. Indeed, the main potential obstacle facing M&A in the sector is not a lack of demand from dealmakers, but a ceiling on the number of operating power assets available for sale as the industry consolidates. Building new capacity will deepen the pool of targets for investors, though bringing next-generation assets onto the grid will take time.
In the near term, rising asset valuations and competition for power assets are likely to sustain high levels of M&A activity. High-quality power assets are scarce, and when they come to market, dealmakers are poised to transact quickly, knowing that if they miss out now, they could end up paying higher prices for similar assets (or the same assets) in the future.
The outlook for deal activity in the power industry is positive, and leveraged finance providers will be hoping that the consolidation trend has further room to run through 2026.