The long-awaited transfer of business ownership from retiring boomers could kick up a gear in 2025, with 85% of dealmakers believing this will be the top deal driver in 2025, up from just 37% in 2024.
But only half of dealmakers believe Australian mid-markets are well-prepared for a change in leadership, and one in four believe mid-market targets lack preparation, which can lead to delays, disruption in the target business, loss of key personnel and other threats to a smooth deal.
In our most recent Dealmakers Report, undertaken in partnership with Mergermarket, we have identified the motivators for Australian businesses to sell this year — and retirement looms large for many.
Four out of five dealmakers believe succession planning will lead to increased M&A activity in 2025 and one in three predict this growth to be significant. In fact, it is the top driver for 85% of dealmakers, who are anticipating retirement momentum will only grow.
Those expectations align with the massive demographic change taking place in boardrooms and business headquarters around the country as the youngest Baby Boomers near retirement.
According to the Australian Small Business and Family Business Ombudsman, nearly half of all small business owners are over 50 and nearly one in four is over 60.
In some sectors — notably agriculture, forestry and fishing — nearly two-thirds of small businesses are owned by people 50-plus.
Overall, this wave of change is expected to see around one million business owners head for exits in the next 10 years, and many have marked 2025 as the year they step back.
When we surveyed business owners as part of our Radar Report series last year, a quarter said they were in the process of packing up their desks or planning to in the immediate future.
The so-called silver tsunami should spell a bumper year for the 97% of dealmakers who say they are actively looking to source Australian M&A deals this year — as well as for owners looking to sell.
But while the timing might be right, dealmakers are sceptical about how well some departing business leaders have planned for their exit.
Just half of dealmakers believe sellers are generally well-prepared, with clear and actionable plans for their succession.
Another 27% rate seller preparedness as neutral but one in four say they believe sellers are unprepared.
This lack of readiness is likely to pose a significant challenge to successful transitions, triggering delays, creating valuation misalignment and prompting deals to fall over.
This supports broader concerns that many would-be sellers are leaving it too late to start preparing for their exit, and find themselves trying to compress what should be a three to five-year process into a year or even a few months.
Without good planning, those looking to step down might not have an established leadership team in place who can provide operational continuity once the owner departs, continuing to drive strategic initiatives and manage the transition effectively.
Without such a team, buyers can quickly lose confidence, doubting whether the business can sustain its performance post-acquisition without the direct involvement of outgoing owners.
A second potential gap lies in transparent and reliable financial forecasts.
Buyers are now far more rigorous about due diligence and look to financials for insights into the business’s future performance and stability, as well as how it manages sustainability.
Without well-documented and realistic financial projections, coupled with a track-record of meeting or exceeding forecasts, buyers will assume the worst and price in additional risk.
In addition, buyers increasingly view documented ESG and sustainability strategies as essential to understanding potential risks and opportunities, and satisfying criteria of financial backers.
Dealmakers also revealed the factors they believe pave the way for successful succession deals.
Almost two in three nominated the retention of key employees as the most effective strategy for ensuring the smooth transition of leadership post-acquisition.
The presence of organisational leaders with corporate memory provides continuity and can reassure both the buyer and the workforce, helping create a more stable takeover while engendering confidence in the new leadership.
Just over half the dealmakers nominated clear timelines for transition as a critical strategy, while a similar proportion nominated the need to invest in leadership development for existing management.
Interestingly, the strategy of keeping on an outgoing owner for advice and to consult back to the business was popular for only a quarter of dealmakers — suggesting a trend towards making a clean break between old and new.
What does this mean for business owners looking to sell?
The opportunity for those looking to step down is clear — but only if they have their house in order.
For those who started their planning a few years ago, now is a great time to be presenting their business in the best possible light.
But for those who have started the New Year resolving to retire, there is little to gain in rushing to market.
Instead, a better place to invest their resources will be in getting a solid succession plan in place this year, doing the work needed to prepare the leadership team and address financials and costs.
Dealmakers will still be looking for Australian deals in 2026, once the hard work of succession strategy is done.
