When it comes to M&A activity, the share of financial buyers such as private equity firms fell from 67 per cent to 12 per cent in the last financial year.
HLB Mann Judd’s latest annual M&A report found the move down to 12 per cent brought the share of strategic buyers at 88 per cent back to FY23 levels after an above-average spike of financial buyers in FY24.
Strategic buyers are those where a company seeks to acquire another to enhance its own strategic goals, while financial ones are typically private equity firms which seek to acquire the company for financial gain and subsequently sell for a profit.
Last year’s spike was caused by firms coming under pressure to deploy ‘dry powder’ which had reached $193 billion at the start of the year. This was combined with narrowing bid-ask spreads which helped bridge valuation gaps, reflecting optimism around stable market conditions, and increased secondary buyout opportunities.
Simon James, partner at HLB Mann Judd, said: “Between FY24 and FY25, we have seen positive momentum (driven by stabilising inflation and falling interest rates) has been disrupted by the renewed tariff uncertainty. Financial buyers are generally more sensitive to short-term return targets, unlike strategic buyers who can take a longer view. The challenging market for raising additional capital results in limited liquidity to transact.”
Recently, private equity has taken a specific interest in financial services, with CC Capital set to acquire Insignia Financial, Oaktree Capital Management investing a stake in AZ NGA, and TA Associates backing Viridian Financial Group.
With all three of these players being US entities, HLB Mann Judd noted deals that involved international entities carried an average multiple of 9.7x which represented a 17 per cent premium to the 8.3x multiple for domestic transactions.
“This may reflect a strong perception of potential synergies from international buyers, particularly in terms of market entry and expanding footprints into the Asia-Pacific region. Furthermore, the distribution between international and domestic transactions has remained consistent in the last three years, with just below one in three transactions being international.”
Overall deal volumes decreased from 1,038 in FY24 to 951 in FY25, with most taking place in the first quarter of the financial year at 301, almost a third of total deals. HLB Mann Judd suggested this was representative of caution among investors amid global economic uncertainty and softening business conditions.
But while transaction volumes were on the decline, the average value rose to $148 million due to the higher number of deals that were worth $1 billion. The average value was up from $127 million in FY24 and $89 million in FY23.
“This suggests corporate confidence remains positive in Australia’s economic outlook, supported by expectations of further interest rate cuts, which could boost business valuations. It also reflects a shift in focus towards transactions with clear strategic value and long-term potential over short-term gains.”
