While M&A activity slowed in the 2025 financial year amid heightened geopolitical, trade, and economic uncertainty, HLB Mann Judd’s latest M&A analysis suggests a rebound may be on the horizon, with factors such as lower inflation, a resilient labour market, and improved market sentiment, pointing to a recovery in M&A activity in the next 12 months.
According to the M&A report, the total number of deals fell to 951 in FY25, down from 1,038 in FY24 and 1,211 in FY23. However the average transaction size increased, from $127 million in FY24 and $89 million in FY23, to $148 million in FY25.
The lower deal volume in FY2025 compared to FY2024 and FY2023 suggests that investors have been exercising greater caution amid rising global economic uncertainty and softening business conditions. But while this caution is still lingering amid persistent geopolitical and economic uncertainty, acquisition opportunities that add to the overall value of the company still exist in the mid-market for those willing to pursue them.
The increase in average deal size is primarily due to a higher average value of deals over $1 billion in FY25. 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 toward transactions with clear strategic value and long-term potential over short-term gains.
Other key structural drivers expected to promote greater deal activity in the coming months and years include Baby Boomers retirements, renewed private equity activity, and growing interest in the renewable and AI-first sectors.
Baby boomer transition
This is a multi-year theme as succession planning is poised to become more important than ever. It is anticipated that the future of mid-market deal activity will be driven by the ‘silver tsunami’.
Private equity involvement
A backlog of portfolio exits, coupled with expected interest rate cuts and record levels of dry powder, suggests a strong rebound in private equity-led transactions.
AI potential
The disruptive potential of AI also has a role to play, prompting many business leaders to consider M&A as a means of enhancing their AI capabilities.
Ongoing energy transition
On top of this, ESG considerations are a further catalyst, with investors favouring companies with strong governance, sustainability and social impact credentials. For instance, within the materials sector, access to lithium and rare earth elements is expected to be the primary driver of M&A, given their critical importance to the energy transition.
Cross-border interest
Australia’s stable regulatory environment and strategic resources, together with favourable interest rates making for attractive pricing, will continue to attract foreign buyers. In particular, inbound M&A from North America and Asia is expected to grow, primarily within the energy and technology sectors.
Further consolidation
Increasingly, buyers are looking to achieve scale, efficiency, and geographic expansion, making consolidation a likely continued theme. In recent years, industries such as healthcare, aged care, education, and professional services have already seen significant consolidation, which is expected to continue across other fragmented, essential service sectors and beyond.