Dry powder refers to the capital committed by investors to a private equity fund but not yet deployed, available for future investments. It is a key indicator of the market's acquisition capacity.

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A high level of dry powder supports demand for targets and can push valuations up, as funds are under pressure to invest within a given horizon. For a seller, a market rich in dry powder is a favourable factor for competitive tension and price.

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Example: a mid-market fund holds CHF 120 million of dry powder to deploy over 24 months. This investment pressure leads it to be competitive on price in the sell-side auction of an attractive target.

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At Hectelion, we take the market's dry powder level into account in our analysis of competitive tension and price positioning in a disposal.