Acquisition Finance in Australia 2025: Trends, Policy Updates & Strategies

Acquisition finance is in the spotlight for 2025 as Australian businesses, private equity, and savvy investors navigate a market shaped by higher interest rates, evolving regulatory oversight, and a return of global M&A appetite. Whether you’re a business owner eyeing expansion, or an investor looking to capitalise on shifting valuations, understanding the latest developments in acquisition finance can give you a decisive edge.

Acquisition Finance: The Engine of Australian Deal-Making

Acquisition finance refers to the funding methods and structures used to buy companies or major assets. In Australia, it’s the backbone of everything from small business buyouts to blockbuster corporate mergers. With the Reserve Bank of Australia (RBA) keeping rates higher for longer in 2025, deal structuring and funding costs are front-of-mind for acquirers and lenders alike.

• Private Equity: Australian PE funds are flush with dry powder but more selective, focusing on sectors like healthcare, tech, and renewables.

• Corporate M&A: Listed companies are using strategic acquisitions to build scale and diversify revenue, especially as organic growth slows.

• SME Buyouts: Baby boomer business exits and succession planning are fueling SME acquisition activity, often financed via bank loans or specialist lenders.

Key 2025 Policy Updates Impacting Acquisition Finance

Australian acquisition finance is being shaped by several regulatory and policy changes in 2025:

• Foreign Investment Review Board (FIRB) Reforms: New FIRB rules target greater transparency and national interest protections, especially for deals in critical infrastructure and tech. Foreign buyers face stricter scrutiny and longer timelines.

• Competition Law Updates: ACCC is stepping up review of mergers in sectors with high consumer impact, such as retail and healthcare. Expect more requests for undertakings or even deal blocks.

• Bank Lending Standards: APRA has encouraged banks to maintain robust credit standards for leveraged finance, leading to tighter covenants and higher equity requirements for borrowers.

These shifts mean acquirers must plan for longer due diligence, flexible deal structures, and alternative funding options—especially for cross-border or highly leveraged transactions.

Emerging Trends: Funding Options and Deal Structures in 2025

With traditional bank lending more conservative, creative funding and deal structuring are on the rise:

• Unitranche and Private Credit: Non-bank lenders are expanding their footprint, offering streamlined “unitranche” loans that blend senior and mezzanine debt. This can speed up execution and offer higher leverage for the right deals.

• Earn-Outs and Vendor Finance: Buyers are using performance-based earn-outs or asking sellers to provide finance, bridging valuation gaps and reducing upfront capital outlay.

• Green and Sustainability-Linked Loans: For acquisitions in renewables or ESG-focused sectors, sustainability-linked finance is increasingly available, with margin discounts tied to environmental targets.

For example, a 2025 renewable energy platform acquisition in Queensland was recently financed using a mix of private credit and a green loan facility, with interest rate incentives tied to the project’s emissions reductions milestones.

Real-World Example: SME Acquisition in a Tight Lending Market

Consider a Brisbane-based tech consultancy acquired in early 2025 by a competitor. With major banks offering only 60% loan-to-value and requiring personal guarantees, the buyer turned to a private credit fund. The deal closed with a unitranche facility at a slightly higher margin, but with more flexible covenants and quicker approval—a trade-off more buyers are considering this year.

What to Watch: Risks and Opportunities Ahead

• Interest Rate Volatility: While the RBA is expected to hold rates steady through mid-2025, any surprise moves could impact deal feasibility and debt serviceability.

• Sector Divergence: Healthcare, tech, and green energy are attracting premium valuations and competitive financing, while retail and discretionary sectors face more cautious lender appetite.

• Regulatory Complexity: Early engagement with advisors and lenders is crucial, especially for deals involving foreign investment or sensitive sectors.