Executive Summary
As we reach the midpoint of 2025, Australia’s mid-market defined as companies with revenues between A$10 million and A$250 million stands at a pivotal juncture. Following a period of macroeconomic volatility, the sector is now experiencing a rare alignment of factors that are catalyzing a new wave of strategic activity. Moderating interest rates, record levels of private equity dry powder, and a generational shift in business ownership are converging to create an environment rich with opportunity but also heightened competition and complexity. At the same time, intensifying geopolitical tensions and global trade disruptions are adding new layers of complexity to dealmaking, requiring heightened agility and resilience from market participants.
Executive Summary
As we reach the midpoint of 2025, Australia’s mid-market defined as companies with revenues between A$10 million and A$250 million stands at a pivotal juncture. Following a period of macroeconomic volatility, the sector is now experiencing a rare alignment of factors that are catalyzing a new wave of strategic activity. Moderating interest rates, record levels of private equity dry powder, and a generational shift in business ownership are converging to create an environment rich with opportunity but also heightened competition and complexity. At the same time, intensifying geopolitical tensions and global trade disruptions are adding new layers of complexity to dealmaking, requiring heightened agility and resilience from market participants.
Market Dynamics: Quality Over Quantity
Recent transaction data underscores a decisive shift in market behaviour. While mid-market M&A deal volume declined by approximately 6% in 2024, aggregate deal value remained robust at A$17.3 billion (Gadens, 2025). This divergence signals a flight to quality, with buyers demonstrating a clear preference for resilient, scalable businesses with differentiated value propositions. Geopolitical uncertainty ranging from ongoing trade disputes between the US and China to escalating conflicts in Europe and the Middle East has led investors to adopt more disciplined, risk-adjusted frameworks, particularly for cross-border transactions. As a result, deal timelines are stretching and valuations are being scrutinised more closely, especially for businesses with significant international exposure or supply chain vulnerabilities.
In mid-market, succession planning has emerged as the predominant driver of activity, cited by 85% of dealmakers as a primary motivator (KPMG, 2025). The aging cohort of baby boomer founders is accelerating ownership transitions, often favouring strategic buyers or private equity partners capable of preserving legacy while unlocking new growth. However, some owners are pausing processes in hopes of more stable conditions, particularly in sectors exposed to international volatility and trade disruptions.
Private equity remains a formidable force, with assets under management exceeding A$320 billion a near threefold increase over the past decade (Australian Investment Council, 2025). This capital overhang is intensifying competition for high-quality assets and driving innovation in deal structures, including minority growth investments and management-led buyouts. Notably, private equity firms are increasingly focused on businesses with robust domestic supply chains and limited exposure to global trade frictions, reflecting a broader market pivot toward resilience and self-reliance.
Sectoral Divergence: Energy,
Digital, and Beyond
Energy Transition:
The global pivot toward renewables continues to drive outsized M&A activity. In 2024, renewable energy transactions reached A$120 billion globally, with private equity accounting for more than half (EY, 2025). Australian businesses positioned in renewables, decarbonisation, and adjacent supply chains are commanding EBITDA multiples of 15–20x, reflecting both scarcity and strategic relevance. However, the sector is not immune to global trade headwinds: tariffs on critical inputs and the reconfiguration of supply chains are prompting acquirers to favour targets with secure, localised sourcing and government-backed offtake agreements.
Digital Infrastructure:
Digital infrastructure remains a high-growth segment, with buyers drawn to data centres, cybersecurity, and software platforms. Yet, supply chain disruptions especially in hardware and semiconductors are leading to increased scrutiny of operational resilience and supplier diversification. Investors are prioritising assets with recurring revenue and minimal exposure to international logistics risks.
Traditional Sectors:
Industrials, manufacturing, and business services are experiencing both consolidation and caution. Domestic consolidation is accelerating as mid-market firms seek scale and operational leverage to offset rising input costs and trade-related volatility. Businesses with localised supply chains, diversified export markets, or alignment with national security and infrastructure priorities are commanding valuation premiums, while those heavily reliant on international trade face greater due diligence and, in some cases, discounted multiples.
Valuations: Premiums for Performance
The valuation environment remains constructive for sellers. Strategic buyers are paying 12–18x EBITDA for market-leading businesses, with recurring revenue models and platform potential attracting even higher multiples sometimes up to 25x revenue (KPMG, 2025). This reflects not only asset scarcity but also the strategic imperative for growth and diversification among both corporates and financial sponsors.
However, buyer sophistication is at an all-time high. Premium valuations are reserved for businesses that can demonstrate sustainable competitive advantage, robust governance, and credible pathways to future growth.
Private Equity: Evolving Value Creation Models
Australian private equity has matured into a value creation partner, offering operational expertise, strategic guidance, and access to global networks. Minority investments and management buyouts are increasingly favoured as mechanisms for both growth capital and succession planning (Australian Investment Council, 2025). Alignment on vision, values, and execution strategy is now a prerequisite for successful partnerships.
Strategic Imperatives for Business Owners
To fully capitalise on current market conditions, business owners should consider the following imperatives:
Begin Preparation Early:
Initiate strategic planning 12–18 months prior to a potential transaction.
Optimise Financials:
Ensure transparency, predictability, and robust reporting.
Enhance Operational Excellence:
Systematise processes and invest in scalable infrastructure.
Develop Leadership:
Strengthen management teams and succession plans.
Articulate a Compelling Narrative:
Clearly communicate market positioning and growth potential.
The Role of Professional Advisory
Increased market complexity and buyer sophistication have elevated the importance of professional advisory. Advisors with deep sector expertise, global networks, and proven transaction execution capabilities can deliver 20–30% superior outcomes (Bain & Company, 2024). Objective counsel and rigorous process management are essential for maximising value and minimising risk.
Outlook: The Road Ahead
Looking forward, the Australian mid-market is poised for continued strength, but the path forward will be shaped by both opportunity and risk. Trade instability – driven by shifting US tariff policies, ongoing China tensions, and the reworking of global trade relationships – is creating winners and losers across sectors. At the same time, Australia’s relatively stable macroeconomic environment, and strategic importance in energy and resources continue to attract inbound investment, particularly from partners aligned with national priorities.
With regulatory changes on the horizon (notably, Australia’s new merger control regime in 2026), many deals are being fast-tracked in 2025 to avoid future complexity. In this environment, the most successful mid-market participants will be those who proactively address supply chain risks, build operational resilience, and align with trusted advisors to navigate the evolving landscape.
Contact Intellectus Capital
For a confidential discussion on how to position your business for success in this evolving landscape, please contact our team at Intellectus Capital.
References
