Benchmark International

‘Dry powder’, or the amount of capital committed to private equity firms, is frequently a strong indicator of future activity levels in the private equity industry.

According to Prequin, a leading alternative-assets industry data and intelligence source, the level of dry powder currently stands at approximately $1.2 trillion, much of which has been generated in the past three years.

With available capital and an appetite to invest during 2014 surpassing pre-recession levels, 2015 looks set to be dominated by private equity interest flooding into the lower-middle market. The most recent estimations state the sub-$100m transaction value market segment accounts for 70% of all private equity activity.

Discussing the current state of the private equity industry and expectations for the year ahead, PitchBook Data, Inc. Senior Director of Analysis, Adley Bowden, commented, “remarkably, PE firms invested nearly $1 trillion of capital globally, despite somewhat difficult market conditions. 2014’s success was a result of PE firms’ ability to adapt and modify their investment strategies to meet today’s realities. We expect 2015 to be even more active for private equity investors as they continue to adapt to these conditions and tailwinds of significant dry powder, active M&A market and recovering economies help deals thrive.”

With acquisitions continuing to rise as shareholder confidence grows and growth strategies are pushed to the forefront of corporate agendas, in addition to increased private equity activity, the competition surrounding deals looks set to send deal values soaring as demand outstrips the supply of quality opportunities to acquire.