Sector gearing is the average or median leverage ratio observed among comparable companies in the same industry sector. It serves as the external reference for determining the target capital structure used in WACC construction for unlisted companies. A company's current gearing above sector median may indicate transient post-acquisition leverage or structural capital intensity; below sector median suggests conservative financial policy or under-utilisation of debt capacity. In business valuation, deviation from sector gearing directly affects the retained target capital structure and WACC.

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Example: to value a Swiss precision mechanics SME with current gearing of 120% (post-acquisition), Hectelion analyses a panel of 8 listed sector comparables. Median sector gearing: 42%. This sector gearing is retained as the target capital structure for WACC construction — with a note documenting the projected deleveraging path from 120% to 42% over 3 years as debt is progressively repaid.

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Hectelion documents sector gearing from listed comparable panels in every WACC construction for unlisted company valuations.