Dry Powder

Dry powder refers to the capital that private equity and venture capital funds have raised from investors but have not yet invested.

Why Dry Powder Matters

For GPs (Fund Managers):

• Pressure to deploy capital
• Management fees charged on committed capital
• Investment period time limits

For LPs (Investors):

• Capital committed but not working
• Opportunity cost
• Future capital call obligations

For Markets:

• High dry powder = competitive deal market
• Drives up acquisition multiples
• Indicates future investment activity

Current Dry Powder Levels

As of 2025-2026:

• Global PE dry powder: ~$2.5 trillion
• Record highs driven by strong fundraising
• Particularly elevated in buyout and growth equity

Dry Powder Calculation

Committed Capital:     $100M
Less: Deployed Capital: ($60M)
Less: Management Fees:   ($5M)
Less: Reserves:         ($10M)
= Dry Powder:           $25M

Impact on SMB Acquisitions

High dry powder means:

• More competition for quality deals
• Higher multiples paid
• Faster deal processes
• More creative deal structures