Dry Powder
Definition
Dry powder is committed but uninvested capital available to private equity and other private capital funds — money LPs have pledged that GPs have not yet deployed. It is the industry's standing purchasing power for new deals and follow-on investments.
High levels of dry powder create deployment pressure: sponsors have finite investment periods, so abundant dry powder tends to support deal activity and can bid up entry multiples. Data providers track aggregate dry powder across private capital; the level shifts constantly with fundraising and deployment, so quote a current source rather than a remembered figure.
For bankers, dry powder is a talking point about market conditions: sponsors with capital to deploy are pitch targets for sell-sides, and their appetite influences auction dynamics and valuations.
Why interviewers ask
Market-awareness questions ("What's going on in the M&A market?") reward candidates who can discuss dry powder, financing conditions, and sponsor activity intelligently. It also shows up when interviewers ask why entry multiples have stayed elevated.
Related terms
Interviews don't test definitions — they test recall under pressure.
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