Australian private equity trends 2025

Last year, we forecast that Australian private equity (PE) transactions would increase in 2025 compared to 2023 and 2024, driven by a rise in private M&A activity as more sale processes emerged. Early in the year, that prediction seemed uncertain, with domestic PE clients expressing frustration over the lack of attractive sale opportunities, while offshore PE and trade players actively pursued take-private deals.

However, as advisors returned from summer breaks and settled back into the office, several high-quality deals emerged, reigniting interest among PE funds. Momentum has continued to build throughout the second half of the year.

Technology, business services, and financial services - including payments and wealth management platforms - have emerged as the most attractive sectors for PE investment. In contrast, only the most compelling opportunities in consumer and retail are being pursued. Over the past 12 months, EBITDA multiples - particularly in technology and business services - have steadily increased.

While healthcare remains a perennial area of interest, some unsuccessful PE investments highlight the challenges of navigating rising cost pressures, fluctuating customer demand and a highly regulated environment.

The mid-market - especially transactions in the A$50 - A$250 million range - has shown strong resilience. Investments have been characterised by a focus on platform plays with clear growth potential and operational improvement, rather than financial engineering. A cautious approach to leverage remains common.

PE funds continue to hold assets longer than anticipated. With limited partners (LPs) pressing for returns, many general partners (GPs) are exploring continuation funds and secondaries. We’re also aware of discussions around GP stake sales to support generational transitions, as founding partners look to pass the baton to rising stars.

Although the IPO window has cracked open, its longevity remains uncertain. Long sponsor escrow periods and concerns about post-IPO performance mean that full trade sales - albeit at lower valuations - remain an attractive exit route.

The trend toward targeted, nuanced and discreet sale processes continues, with early engagement of a select group of potential buyers proving popular. However, there is a slight shift emerging, as bankers begin preparing some quality assets for a more traditional competitive process.

We anticipate a busy close to 2025, with buyers and sellers rushing to close deals ahead of the new merger clearance regime. As a result, we expect the total deal count for 2025 to exceed that of 2024.

Looking ahead to 2026

We expect PE activity to continue gaining momentum. Key themes will include:

• exits from existing investments;
   
• corporate carve-outs from legacy businesses under investor pressure to streamline balance sheets;
   
• more take privates, particularly by offshore PE funds;
   
• continued appetite for growth in technology, business services and financial services; and
   
• growing interest in businesses positioned to benefit from increased demand for onshore manufacturing, particularly in the defence sector.