Dealmakers
Contents
Methodology
For this publication, Pitcher Partners commissioned Mergermarket to canvas the opinions of 60 M&A dealmakers who have completed at least one deal in Australia in the past 12 months. 60% of the respondents were from Australian corporations, 30% were from foreign corporations with operations in Australia, 5% were from Australian private equity firms, and 5% were from foreign private equity firms.
All dollar figures, unless otherwise stated, are in Australian dollars (AUD). Value figures are approximations and have been rounded. Data used in this report was compiled on January 6, 2025 using Dealogic data and additional sources noted within this report.
Percentages may not sum to 100% due to rounding. Unless otherwise stated, all date references refer to calendar year and not financial year.
Foreword Australian M&A in 2025
The Australian M&A market is at a crossroads – and the view ahead for dealmakers presents equal parts challenge and opportunity.
In our recent survey of dealmakers, the mood of the market for 2025 is one of wary optimism. Even amid persistent challenges (geopolitical concerns and ongoing economic headwinds), ambition remains strong, although sentiment has become more circumspect.
Dealmakers gave the Australian M&A landscape a 69% rating, a notable drop from 77% in 2024 and the lowest outlook rating in four years. It’s a signal that today’s market dynamics – persistent inflation, stubborn interest rates and a shaky domestic property & construction market – are forcing even the most seasoned dealmakers to pause and rethink their intentions.
Higher costs of capital have made dealmaking harder to justify, whilst fierce competition for quality assets has meant that only the most strategic of acquisitions will proceed. Many respondents however see these challenges as a temporary inconvenience rather than a fundamental shift. After all, Australia remains a compelling investment destination, with a stable regulatory framework and thriving sectors like technology, renewable energy and infrastructure keeping it firmly on the radar of shrewd dealmakers.
As such, many market participants see a silver lining in the immediate outlook – and recent M&A trends show a turnaround in dealmaking. Notably, deal values during 2024 saw a surprising 30% increase, alongside a 2% increase in volumes since 2023. This sets the scene for a possible resurgence, with dealmakers hopeful that 1H 2025 will extend the wave of deal activity. The majority of dealmakers agree that interest rate cuts will be key to reigniting momentum.
Additionally, recent merger law reforms that passed Parliament in December 2024, but which don’t officially come into effect until 1 January 2026, may result in a flurry of deals being brought forward by acquirers and sellers trying to side-step the new legislation. On the flip side, the federal election, to be held no later than 17 May 2025, is likely to hinder momentum if history is any guide to go by.
One thing that everyone agrees on is that 2025 will throw up its fair share of surprises. If macroeconomic pressures ease and confidence returns, the market could rebound further and faster than expected. For those ready to act, the next 12 months could represent a rare window of opportunity to secure high-quality assets at attractive valuations.
Nowhere is this more evident than in the mid-market, where succession planning, founder exits and consolidation are creating fertile ground for dealmakers. That is not to say it hasn’t been a challenging year for the mid-market thanks to inflation pressures, no interest rate relief and the lowest
sentiment in years, leaving the sector’s deal values and volumes in line with 2023. However, these businesses, often family-owned or privately held, offer both attractive entry points and significant growth potential for investors who can bring strategic value and operational expertise to the table.
Looking ahead, the challenges for dealmakers are real and potentially growing, but so are the opportunities. The boldest moves are often made when the path ahead is still unclear. For those willing to embrace this uncertainty, 2025 could be the year where aspiration meets opportunity as the next big chapter in Australian M&A unfolds.
Key findings
Australia
change in 2024 deal volume (975) for overall M&A in Australia compared to 2023 (958)
Mid-market
change in deal values
($138.9bn) for overall M&A in Australia compared to 2023 ($106.5bn)
are actively looking for M&A opportunities in Australia and will continue to source deals over the next year
say M&A conditions in Australia will get better in 2025
change in 2024 deal volume (270) for mid-market M&A in Australia compared to 2023 (287)
change in 2024 deal value ($17.3bn) for mid-market M&A in Australia compared to 2023 ($19bn)
say succession planning will be a key driver of M&A in the mid-market in 2025
plan to increase their mid-market investments over the next 12 months
identify inflation and economic uncertainty as key risks to future dealmaking, rising from 28% and 33% respectively since 2023
Australian M&A 2025: Abundant opportunities amid cooling sentiment
Australia is a cornerstone market for M&A in the Asia-Pacific region, but 2025 could mark a year of recalibration and emerging caution.
The M&A scene in Australia showed promising signs of recovering in 2024, marking the end of a two-year decline in both deal volumes and values. Deal activity rose by 2% compared to 2023, a small yet significant reversal of a downtrend observed since the post-pandemic deal spree (Figure 1).
More importantly, deal values posted a much stronger finish than expected. The approximately AU$138.9bn in deals in 2024 – a 30% uptick from 2023 – signals renewed confidence among investors and corporate buyers in Australia’s economic environment and immediate outlook. The upward momentum in 2024 aligns closely with global M&A trends, where slight increases in deal volumes were accompanied by a more pronounced recovery in transaction values.
Trending: a strong and sophisticated market
While deal volumes remain below pre-pandemic activity, these lower levels signal a maturing market where quality is paramount. Dealmakers are playing it smarter, betting on fewer but larger and more impactful deals.
The Australian market, known for its stability and strategic opportunities, is drawing interest from those ready to think big. Numerous high-value sectors like renewable energy, healthcare and tech are proving that in 2024 and the year ahead, M&A is about making the right move, not every move.
As the market evolves, several key themes are emerging that will transform how deals get done:
Selective investment strategies
Dealmakers are becoming more discerning, prioritising quality over quantity.
Market maturation
Australia’s M&A market has reached a stage of greater sophistication, where the ’easy wins‘ of earlier years are mostly exhausted. As a result, deals are becoming more intricate, requiring enhanced due diligence, innovative structuring and deeper industry expertise. While opportunities remain, dealmakers must acknowledge the need for more robust planning and execution to unlock value.
Economic uncertainty
Global economic conditions are influencing M&A activity. These factors are causing dealmakers to approach transactions with heightened caution, as economic unpredictability and higher costs of capital pose challenges to valuations, financing and long-term performance projections.
Australian M&A
Figure 2: Which of the following best describes your intentions with regard to investing/M&A into Australia in the year ahead?
Wavering sentiments toward the economy may also be depressing intentions to invest. Although still positive, only 52% say they will increase their M&A in the year ahead, the lowest percentage in four years (Figure 2). This drop signals that dealmakers may be more circumspect on dealmaking activity for the year ahead and many are recalibrating their strategies accordingly.
Investment intentions: a mix of caution and optimism
As such, Australian M&A prospects continue to attract significant attention from international dealmakers, as 97% of respondents say they are actively searching for deals in the market (Figure 3). This strong sentiment and commitment underscore a key theme: Australia’s strategic importance within Asia Pacific (APAC) remains unparalleled.
That being said, perceptions regarding Australia’s economic strength are changing. This has been signalled by a noticeable decline in optimism: only 38% of respondents think Australia will have the strongest economy across APAC in the year ahead, compared to 100% last year.
This cooling confidence can be partly attributed to global economic uncertainties and shifting attitudes toward other markets in APAC. It may also be reflective of the fact that 2025 is a federal election year in Australia where current polling indicates a real possibility of a change in Government. It may also be reflective of other markets in the AsiaPac region that are heating up. For instance, China’s recent stimulus measures have reinvigorated investor interests – and as a result, respondents ranked the Chinese market’s economic prospects much higher than in the past. It remains to be seen however whether the re-election of Donald Trump in the US and subsequent potential trade tensions stemming from US-China relations could redirect attention back to Australia as a more attractive alternative in the near term.
97% say they are seeking M&A opportunities in the Australian market 38% think Australia will have the strongest economy across APAC in 2025
(compared to 100% last year)
Figure 3: Where will you be looking for M&A opportunities within the next 12 months? Which markets will have the strongest economy/economic growth in the year ahead?
Outlook 2025: tempered optimism?
Despite shifting sentiments, respondents remain largely optimistic about the Australian M&A landscape. 55% anticipate improving conditions in 2025, however this is down from 85% in the previous year. Equally, there was a rise in the perception that the conditions will get moderately worse (18%, up from 3% in 2024) and for the first time, respondents have expressed an expectation that conditions may get significantly worse (3%). So whilst the majority are seeing a silver lining, it seems that dealmakers are tempering optimism with realism when considering their future dealmaking opportunities. (Figure 4).
Regardless, Australia’s safety and predictability remain its defining strengths. A notable 62% of respondents cite these qualities as key reasons for seeking out or increasing investments, underscoring the country’s appeal as a stable market amid global turbulence (Figure 5). This is however the lowest rating in the past 3 years indicating that comparative global turbulence is at its most stable in recent years. On the domestic front, challenges such as regulatory hurdles – particularly from the Australian Competition and Consumer Commission (ACCC) –are shaping the timing and structure of deals. Many dealmakers may opt to expedite transactions in early 2025 to avoid potential regulatory bottlenecks, creating a ’race to close‘ environment.
The confidence score highlights the degree of caution exhibited by dealmakers considering opportunities last year. This was driven predominantly by challenging business conditions, economic uncertainty and domestic political challenges. As conditions improve and the federal election passes we can expect a flurry of activity.
Michael Sonego, Partner, Pitcher Partners Melbourne
Figure 5: How much of an impact have current macro challenges
Figure 4: What is your view of Australian M&A conditions and sentiment for the year ahead?
Mid-market deals: Stability and growth potential
Dealmakers express strong interest in the mid-market, underlining its importance as a vital area for investment.
On the mid-market front, despite a challenging year for dealmakers characterised by stubborn inflation, a lack of interest rate relief and the lowest sentiment in years – M&A has started to flatten out (Figure 6). This comes after two years of steep declines in deal volume and with deal values now falling within pre-pandemic ranges.
While larger deals have dominated headlines, as investors have gravitated toward high-value transactions, dealmakers still recognise the potential of the mid-market, which remains a vital part of Australia’s M&A ecosystem. Opportunities abound for buyers willing to navigate the complexities of smaller transactions and these deals continue to offer an entry point into high-potential, niche sectors like agribusiness, boutique tech firms and specialised manufacturing that are often overlooked by larger players.
For these reasons and many others, Australian mid-market M&A continues to command attention from global dealmakers for its stability, manageable risk and opportunities for value creation. Most dealmakers (60%) expressed plans to increase their investments in the mid-market in 2025, compared to the 52% who say they plan to invest more broadly in the overall M&A market (Figure 8). This suggests that while the broader M&A environment may be subject to volatility, the mid-market’s relative predictability makes it an appealing target segment for investors.
There are better mid-market opportunities in Australia. Companies in the segment are known to take objective decisions for growth and their strategic partnerships have been effective in driving up revenues.
Australian mid-market M&A
Figure 6: Australian mid-market M&A
Key advantages
While broader economic challenges persist, the consistent performance and unique attributes of the mid-market ensure its position as a key driver of investment momentum in the year ahead. Dealmakers highlight several areas where the mid-market excels over small-cap transactions or mega deals.
Investor appeal
Figure 7: What makes Australia an attractive market for M&A? (Select all that apply for each column) 0
Low risk compared to regional markets
More than half (55%) of dealmakers highlighted low risk as the primary feature of the Australian mid-market, particularly in contrast to other markets in APAC (Figure 7). This perception of stability is bolstered by Australia’s robust legal and regulatory systems, which reduce uncertainty and ensure a high degree of investor protection.
Valuations and returns
52% of respondents say mid-market businesses present vast opportunities for value creation through operational improvements, digital transformation or strategic partnerships, making them attractive for investors seeking reasonable entry points with significant potential. While valuations are typically higher than those in emerging markets, the more predictable returns offered by Australian assets reflect the relative safehaven that resonates with dealmakers seeking stability and certainty.
Technology
Dealmakers also highlight Australia’s burgeoning and innovative tech ecosystem in the mid-market as a key advantage. There is particular appeal in emerging industries like fintech, medtech and renewable energy where Australian companies are leveraging cutting-edge innovations to create scalable and competitive business models. These tech-driven opportunities provide dealmakers with access to businesses that are not only leading global trends but also positioned for sustainable growth.
Deal sourcing opportunities
Mid-market businesses in Australia present abundant deal sourcing opportunities due to their prevalence across a variety of industries. The country’s geographic location, serving as a bridge between Western and Asian markets, further enhances its appeal, attracting global dealmakers seeking to expand their regional footprints. Likewise, Australia’s established network of advisors, brokers and intermediaries plays a pivotal role in ensuring that dealmakers have access to a steady flow of well-vetted opportunities and adequately mitigate risk in their clients’ acquisition pursuits.
Investment intentions
8: Which of the following best describes your intentions regarding investing/M&A into Australia in the year ahead?
Market perception
9: Generally, do you feel Australia offers better or worse mid-market M&A opportunities compared to other global markets?
There is lower risk overall compared to the home market. The uncertainties that emerged from geopolitical distress and the pandemic have continued to affect the pace of investing in other regional markets.
Perceptions of Australia’s mid-market on a global scale reinforce its appeal. Nearly two-thirds (62%) of respondents believe that the quality of mid-market opportunities in Australia is superior to those in other markets, with another 33% rating them as at least equal (Figure 9).
The returns on investments have been optimal. Acquirers are able to make operational and structural changes to derive the necessary returns on investments. This makes Australia an attractive market.
Head of strategy, UK-based company
CEO, Australian company
Figure
Figure
Spotlight on sectors:
Respondents reflect on which sectors will be hotspots for mid-market M&A, and which may experience distress in 2025.
TMT: Exciting and ever-evolving
An overwhelming 85% of respondents anticipate increased deal flow in the TMT sector through 2025 (Figure 10). The sector’s growth is being fuelled by the rapid integration of tech across industries as businesses race to stay competitive in a digitally transformed world.
One key driver is the adoption of AI and large language models, both of which are revolutionising operations in sectors such as finance, healthcare and retail. Businesses are using M&A to acquire AI capabilities, enhance data-driven decision making and unlock new ways of doing business. AI-powered innovations, from predictive analytics to customer service automation, are increasingly becoming essential tools for businesses looking to scale.
Cross-sector applications, such as tech-enabled agriculture and advanced manufacturing, have also made TMT a cornerstone of Australia’s innovation economy. Additionally, robust government support for digital infrastructure has positioned the TMT sector to remain at the forefront of Australian mid-market M&A, offering dealmakers a pathway to capitalise on transformative technologies.
Sector watch
Figure 10: Which of the following sectors will see increases in mid-market M&A in the next 12 months? Which will see possible increasing distressed M&A in the next 12 months?
Industrials and chemicals
Many respondents (62%) see a robust M&A outlook in the industrials and chemicals industry. This optimism is fuelled by the sector’s strategic role in Australia’s transition toward sustainability and advanced manufacturing. Companies are increasingly leveraging M&A to invest in technologies that increase efficiency, reduce emissions and meet rising ESG expectations.
Australia’s commitment to decarbonisation further fuels activity, with dealmakers targeting businesses involved in renewable energy technologies. This convergence of sustainability and industrial strength positions the sector as a key driver of mid-market M&A growth.
Distress
watch: Real estate, agriculture and construction
Challenges loom for real estate, construction and agribusiness, with respondents identifying these as key areas of distress. Stubborn interest rates are a common thread, tightening financial conditions and pressuring businesses reliant on external capital.
In real estate, 38% of respondents point to mounting difficulties as developers face higher borrowing costs, higher construction costs, a cooling property market (in certain segments of certain territories) and growing expectations for sustainable projects. In construction, those surveyed highlight rising material and labour costs as key pressures, leading to constrained margins and potential consolidation opportunities for stronger players.
Agribusiness faces a uniquely complex outlook. Respondents cite climate change as a major challenge, with extreme weather events disrupting operations. Additionally, succession planning remains a critical issue, as two-thirds of Australian agribusiness owners are over 50 (according to the Australian Small Business and Family Enterprise Ombudsman) – and many may lack a clear exit strategy. The sector’s future hinges on adopting technology and improving operational efficiency, though smaller, family-run businesses may struggle to meet these demands.
Companies are actively sourcing synergies and also focusing on their digital transformation efforts.
More distressed deals in construction and real estate will be noticed. The requirements from these industries have changed, and many companies do not have the funds to meet these requirements, mainly related to sustainability.
Head of strategy, Japanese company
Head of strategy, Australian company
Deal drivers: Succession
planning takes centre stage
Generational leadership transitions are poised to be a game changer in the mid-market across 2025.
Mid-market businesses, which form the engine room of Australia’s economy, often have long-standing family- or founder-led leadership structures. With many of these leaders approaching retirement, the urgency to develop and execute succession plans has intensified.
Over the past year, succession planning has emerged as a critical driver of mid-market M&A in Australia, with 85% of dealmakers saying this is the top deal driver in 2025 (Figure 11). This is a striking increase from 37% in 2024 and highlights a growing awareness toward the need for well-orchestrated transitions in ownership within mid-market businesses. Likewise, 80% of respondents think that succession planning will lead to increased M&A activity – and 35% predict this growth to be significant (Figure 12).
Driving deals
In order for companies to succeed in competitive markets, succession planning is very important. It reduces the continuance risks of an organisation.
Figure 11: What will be the main drivers of M&A activity in 2025?
Succession planning
Foreign dealmakers into Australia
Amount of capital to be deployed by Private Equity
More realistic value expectations of sellers
Valuation alignment between sellers and buyers
Divestiture of non-core assets
Mid-market M&A Overall M&A
Succession planning and sale-readiness
Preparing to sell: A mixed landscape
The readiness of sellers to implement effective succession plans is mixed. While 50% of dealmakers say sellers are generally well-prepared with clear and actionable plans, another 27% rated seller preparedness as neutral and 24% report that sellers are simply unprepared (Figure 13). This lack of readiness among nearly one in four sellers poses a significant challenge to successful transitions, potentially leading to delays, valuation misalignment or even deal failures.
The high percentage of unprepared sellers highlights critical gaps in understanding and addressing the complexities of these transitions. Many mid-market business owners may be unfamiliar with the steps required to transition ownership effectively. This gap creates opportunities for advisors and investors to engage earlier in the process, providing necessary guidance to help businesses position themselves for a successful sale.
In my experience, they could do more to implement a practical plan to drive and reduce continuance challenges. Companies mostly focus on expansion, without giving equal importance to succession planning.
CFO, Australian company
Figure 13: In your experience, how well-prepared are mid-market companies in Australia in terms of having a clear and executable succession plan?
Many dealmakers highlighted two primary factors that influence the attractiveness and viability of a sale (Figure 14):
Strong leadership teams
A robust and experienced management team is the most crucial consideration among dealmakers. Buyers place significant value on leadership teams capable of maintaining operational continuity, driving strategic initiatives and managing the transition effectively. This reassures buyers that the business can sustain its performance post-acquisition without the direct involvement of outgoing owners.
Financial clarity and resilience
Transparent and reliable financial forecasts were the second most important factor for buyers. These forecasts must withstand rigorous due diligence as they provide critical insights into the business’s future performance and stability. Well-documented and realistic financial projections, coupled with a track-record of meeting or exceeding forecasts, build buyer confidence and reduce perceived risks.
Setting up for success(ion)
Deeper insights
Our recent Business Radar report reinforces sentiments toward succession planning in Australia and shows that many mid-market businesses either don’t know if they have a transition plan in place or haven’t started one yet.
Additional insights show that some mid-market leaders may be underestimating the time and complexity involved in passing the torch. This data shows that there are key differences between businesses by turnover and also the overall size of the company.
Figure 14: What is the most important succession planning consideration when looking at whether a business is sale-ready?
Strategies for successful transitions
Ensuring a smooth transition of ownership is critical to preserving business value and setting the foundation for long-term success post-deal. Dealmakers identify two key strategies that are instrumental in achieving successful leadership transitions:
Retaining key employees
Retention of essential talent was cited as the most important strategy among 62% of respondents (Figure 15). Key employees hold invaluable knowledge about the business and play a central role in maintaining operational stability during the transition. Their presence can provide continuity and reassures both the buyer and broader workforce, fostering confidence in the new leadership structure.
Clear leadership handover timelines
53% of respondents highlighted the importance of well-defined leadership handover timelines. These timelines provide clarity for all stakeholders and can help minimise disruptions during the transition period.
Strategies for leadership transition
Figure 15: What succession planning strategies do you find most effective for ensuring the smooth transition of leadership post-acquisition? (Select all that apply)
Retention of key employees
Clear leadership handover timeline
Leadership development programs for existing management
Involvement of external advisors or consultants
Phased transition over a multi-year period
Establishing an interim management team
Retaining outgoing owners as advisors
A key part of any business is its people. When starting a succession plan, leaders need to consider their incentive and retention strategy including how they’ll communicate a potential ownership change to staff. This fosters confidence in new leadership and promotes ongoing business stability.
James Beaumont, Partner, Pitcher Partners Melbourne
Deal rationales: From strategic to opportunistic
Reflecting the impact that economic uncertainties are having on dealmakers, many noted a marked pivot in their deal rationale from longterm planning to a more opportunistic approach. 53% of respondents say recent deals were in response to immediate opportunities as opposed to 40% who engaged in deals as part of a strategic plan (Figure 16). It also underscores the growing difficulty of long-term planning in an environment characterised by economic challenges and inflationary pressures, both domestically and globally.
Dealmakers appear to be recalibrating their strategies to navigate a volatile market where traditional forecasting tools may no longer provide a reliable roadmap. Interest rates, fluctuating commodity prices and geopolitical tensions are creating a backdrop of unpredictability, prompting many dealmakers to prioritise flexibility over rigid long-term strategies. This trend also reflects a broader reassessment of value, with many dealmakers seizing deals that align with short-term market dynamics or sector-specific disruptions.
Additionally, the rise of opportunistic dealmaking could be driven by the increasingly competitive nature of the market. With Australia maintaining its reputation as a safe and predictable investment environment, dealmakers face pressure to act swiftly when favourable deals arise. More and more, this is the case in sectors facing rapid technological changes or competitive pressures, where waiting could mean missing out on crucial opportunities.
As industries continue to evolve in response to intensifying technological disruptions, digital transformation has solidified its position as the undisputed strategic focus for 40% of dealmakers – a notable increase from 30% in the 2024 outlook (Figure 17) This highlights the urgency with which firms are seeking to integrate new technologies to stay competitive and efficient in a changing and challenging business landscape.
This commitment to remaining nimble suggests that a transformative period could lie ahead for Australian M&A, where flexibility and a propensity to act when good opportunities arise are critical to securing competitive advantages.
Investment rationales
Figure 16: Which of the following best describes the rationale behind your most recent investment into Australia? (Select one)
Impacts on acquisition strategy
17: How have current macro challenges changed your acquisition strategy for Australia?
Reacting to market competitors (fear of falling behind/want to remain competitive)
Opportunistic (based on market conditions and developing events)
Strategic acquisition (in planning for at least 12-24 months)
Figure
Focus on
An opportunity to invest in a feed and nutrition services company came up. Since the opportunity was ideal to pursue to fulfil our growth aspirations, we decided to move forward with the transaction.
Broad market drivers: Divestitures, PE and domestic M&A
Across the broader M&A market, 52% of dealmakers say that divestitures of non-core assets will be the primary driver of deal activity. Companies are increasingly focusing on streamlining operations and reallocating resources in response to challenging economic conditions. This trend is expected to create a surge in available assets, presenting new opportunities for dealmakers. According to the head of corporate development at an Australian company, “Divestiture of non-core assets will increase M&A deal numbers. Non-core assets that do not synergise with core operations of the company might become a burden for the parent company.”
Head of strategy and transformation, Australian corporation
Despite dipping sentiment around Australia’s M&A environment, the relatively stable regulatory landscape remains an advantage. We will likely see local firms capitalising on opportunities to drive domestic growth – in a bid to increase their competitiveness in the market, drive scale and tap into more market segments.
Private equity (PE) is also poised to play a pivotal role in the deal market, with 43% of dealmakers highlighting its influence. PE firms remain active in Australia, leveraging the country’s stability and favourable regulatory environment to pursue value-driven deals. The availability of underutilised assets, combined with substantial ‘dry powder’, positions PE as a key player in driving deal flow.
Additionally, 43% of respondents see listed domestic companies seeking growth through M&A as a critical driver. Local firms will leverage acquisitions to enhance competitiveness, achieve scale and access new markets. Australia’s relatively stable regulatory environment supports these efforts, providing a conducive backdrop for domestic-focused transactions.
43% of respondents see listed domestic companies seeking growth through M&A as a critical driver
52% of dealmakers say that divestitures of non-core assets will be the primary driver of deal activity
Andy Hough, Partner, Pitcher Partners Sydney
Risk outlook:
Dealmakers in Australia must grapple with new challenges and ongoing obstacles as they navigate the market in 2025.
The Australian M&A landscape is facing a changing risk environment that reflects broader global and domestic economic trends. Familiar macroeconomic challenges from past years are intensifying, contributing to a more cautious approach to dealmaking.
Top challenges: Inflation and economic uncertainty
Inflation and economic uncertainty are now the top challenges, cited by 43% of dealmakers (Figure 18). Concerns over inflation surged compared to last year, when only 28% said it was a key risk. Likewise, economic uncertainty, a concern for only 33% last year, has become a growing concern. Persistent supply chain disruptions, geopolitical tensions and labour market pressures are fuelling inflation, complicating valuations and asset pricing, particularly in cost-sensitive sectors like manufacturing and retail.
Challenges facing dealmakers
Rising inflation will be a threat for dealmaking, especially affecting valuation and financial projections. Valuations gaps may be wider if the inflation threats are not controlled next year.
Head of M&A at a Swedish company.
Figure 18: What are the top challenges facing mid-market dealmakers in Australia in the next 12 months? Please choose three.
around economic recovery
40%
Concerns over interest rates are dropping, with 40% of dealmakers citing them as a major challenge (down from 48%)
Interest rates, though still a challenge, appear less daunting than last year, with 40% of respondents citing them as a concern, down from 48%. This decline may reflect a period of adjustment, as dealmakers recalibrate strategies in response to the Reserve Bank of Australia’s sustained tightening. These dynamics have created a more cautious deal environment. Buyers are placing greater emphasis on due diligence and conservative growth assumptions. Despite these challenges, disciplined and strategic dealmakers can still find opportunities. By focusing on fundamentals and targeting sectors with long-term resilience, dealmakers can navigate this complex landscape successfully.
Deal timelines: New and growing complexities
The pace of deals being completed is slowing for many dealmakers. In this year’s survey, 35% of respondents say their recent deals took longer than expected, compared to 32% who reported faster processes (Figure 19). This marks a notable shift from 48% last year who said deals were completed ahead of schedule.
Respondents point to many of the leading risk factors listed above – high inflation and uncertainty regarding the economic future – as the major contributors to these extended timelines. Dealmakers are proceeding with greater scrutiny to ensure valuations align with longterm growth prospects, adding weeks or months to the negotiation and closing process.
Australian deal timelines
Figure 19: Thinking about your last deal in Australia, how long did it take to complete in comparison to prior years?
The uncertainty around economic recovery will delay M&A decisions. Decision-makers will have to review all risks comprehensively and ensure that decisions are future-proof.
CEO, Australian company
The growing complexity of due diligence is another factor. Over half of respondents (52%) say that due diligence has become more difficult to complete compared to past years (Figure 20). This reflects not only an increasingly complicated and challenging deal environment, but also heightened expectations for attention to detail. Likewise, dealmakers now face greater pressure to uncover potential risks and ensure transactions meet stricter compliance standards, particularly with regard to ESG.
ESG is continuing to be central to dealmaking, with 52% saying it factors into every deal and another 45% saying it is considered in most transactions (Figure 21). ESG due diligence requires assessing vast amounts of data, from environmental impact to governance practices, which adds complexity to an already lengthy process.
In Australia’s mid-market, ESG is now a cornerstone. ESG-challenged businesses are delaying their exit aspirations, anticipating low valuations or a lack of buyer interest. Meanwhile, buyers continue to be increasingly reluctant to pursue deals that pose reputational risks. This is reflective of a maturing market where ESG considerations are driving higher-quality transactions.
52% of respondents say ESG factors into every deal
ESG has been consistently drawing more focus year on year, and businesses without a clear ESG strategy will struggle in today’s market. Dealmakers are becoming more cautious, and a business lacking an ESG strategy poses compliance concerns as well as future reputational risks.
Impact: Due diligence
Figure 20: How much more difficult is it to complete due diligence in the current environment compared to 12 months ago?
Stephen Craig , Partner, Pitcher Partners Melbourne
Impact: ESG
Figure 21: How often have ESG considerations factored into the deal-making process regarding your investments into the Australian mid-market within the past year?
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