More than 500,000 Australian businesses are owned by someone aged 60 or older. New Reserve Bank of Australia (RBA) research shows only a narrow band of medium sized, already profitable companies attract serious buyer interest.
Trade operators, search funds, private equity firms and individual investors are all active in the market at the same time. But the wave of owners approaching retirement is overwhelmingly unprepared for what those buyers now demand, and that gap is starting to decide which businesses sell and which simply close their doors.
A Widening Buyer Pool
In comments to SmartCompany, James Frank, chief executive partner at Frank Law, says the list of active buyers keeps growing. Trade buyers, entrepreneurs through acquisition, search funds and private equity firms are all still active, and private capital is putting in a bigger share of the money than it used to.
Infrastructure and AI related businesses are drawing plenty of attention right now. But Frank says buyers still want “the good old fashioned ‘boring’ business that makes free cash flow.”
- Trade buyers – competitors or adjacent operators buying for strategic fit
- Entrepreneurs through acquisition – individuals who raise capital to buy and personally run a single business
- Search funds – investor backed vehicles built specifically to find, buy and operate one company
- Private equity firms – alongside a growing pool of private capital more broadly
- Individual investors – who increasingly treat a business purchase like buying property or shares
Jaime Almond, a business adviser at Hatcher Advisory, is watching that last group closely. Many are hunting for older, established businesses they can modernise with automation and AI, particularly ones whose owners are nearing retirement.
“They’ve seen business acquisitions almost like the property market or the share market,” Almond says. “They see businesses as assets.”
That mindset has a name in the finance world: entrepreneurship through acquisition, or ETA, where an individual raises money specifically to buy and run one existing company rather than start from zero. Search funds, the investment vehicles built around that model, only launched in Australia in a traditional form around 2021, and the market has quickly gained significant momentum since. Sellers with a genuinely standout business have another category to watch too: a small pool of buyers willing to pay above the going multiple, who tend to surface through referral networks and specialist advisers rather than public listings.
The Reserve Bank’s Formula for a Target
The RBA research advisers keep citing is not a survey of opinions. It is a discussion paper written by economists at the RBA, the Australian Competition and Consumer Commission (ACCC) and the Australian National University, built from the first large scale database of Australian mergers and acquisitions.
The database pulls together three signals: clusters of employees moving between firms, companies shifting between tax consolidated groups, and takeover notifications filed with the securities regulator. Across 20 years of records, it finds roughly 1,500 mergers a year across the whole economy, a tiny fraction of Australia’s 2.5 million active businesses.
The paper’s central finding cuts against the tidy story sellers are usually told. It found that highly profitable but low productivity firms, along with businesses holding patents, are the ones most likely to be acquired. “Firms with a turnover of between $10 million and $50 million are around 1.4 times more likely to be a merger target in any given year, compared to the benchmark firms with a turnover of less than $1 million,” the data shows. The authors theorise that acquirers are chasing businesses that could “benefit from reorganisation, which could include rationalising the workforce and gaining synergies.”
| Annual Turnover | Likelihood of Being Acquired | What the RBA’s Data Suggests |
|---|---|---|
| Under $1 million | Benchmark rate | Baseline group in the study; rarely a formal M&A target |
| $5 million to $10 million | Next most likely tier | Battle tested at scale, small enough to integrate quickly |
| $10 million to $50 million | 1.4 times more likely | Profitable but often low productivity, plus patent holders |
That is a different definition of an attractive target than the one advisers describe. Frank, Almond and Caruso all talk about buyers wanting a business that already runs cleanly, without a founder holding it together. The RBA’s own dataset suggests some of the country’s most active acquirers are doing close to the opposite: buying a business partly because it is inefficient, then fixing it themselves.
That data also describes a narrow, formal slice of the market: registered company mergers large enough to leave a paper trail. It says little about the far bigger and messier world of small business sales that never touch a securities filing, which is exactly where Australia’s succession problem lives.
How Big Is Australia’s Succession Wave?
Roughly half of Australia’s 2.5 million active businesses are owned by someone over 50, and about 22 per cent, more than 500,000 firms, are owned by someone 60 or older. Nearly half of Baby Boomer owners plan to exit within five years, and most have never written down what happens next.
- 48% of Baby Boomer business owners aged 60 to 78 plan to exit within one to five years, with 87 per cent citing retirement as the reason, according to MYOB’s Bi-Annual Business Monitor
- 500,000+ Australian businesses, about 22 per cent of the total, are owned by someone 60 or older
- 24% of small and mid sized businesses have a documented succession plan
- 34% of Baby Boomer owners plan to fund their retirement mainly from the proceeds of a sale, while 19 per cent intend to pass the business to family
A separate, more recent survey from VistaPrint found the planning gap may be even wider than MYOB’s figures suggest, putting the share of owners with a documented plan at just 16 per cent, and finding 45 per cent of owners actively considering an exit have no plan of any kind. A synthesis of the underlying ABS and MYOB succession figures compiled by Scale Suite calls the 48 per cent versus 24 per cent split the headline number of the entire wave.
That timeline is landing on a small business sector already under strain. One recent survey found nearly two in three Australian small business owners reporting financial stress, well before factoring in an ownership transition most have not planned for. Lenders such as ScotPac have separately estimated that Baby Boomers own roughly 80 per cent of Australia’s small and medium enterprises, a pool worth in the order of $3.5 trillion in Australian dollars.
Systems Beat Stories in Diligence
Healthy profits get a buyer’s attention. Almond says they rarely tell the whole story.
“The first thing people always look at is profit,” she says. “But looking at profit alone doesn’t give you the full picture.” Buyers quickly move on to how dependent the business is on its owner, how concentrated its customer base is, and how organised its records are behind the scenes. High customer concentration, messy financials and founders who remain central to every decision get treated as risk, not character.
David Caruso, chief executive of OnlineBusiness Market, says that scrutiny has only intensified. “Buyers have stopped paying for stories,” he says. “They want clean financials and revenue they can verify themselves, in a business that runs on systems rather than the founder’s sweat.”
The businesses most likely to be sold right now are the ones least likely to fit that description. Research on Baby Boomer owned businesses found only 9 per cent had adopted cloud based inventory management, 12 per cent had done so for sales and marketing, and 19 per cent for employee management. Separately, 71 per cent of Australian business owners say their business relies more on personal reputation and word of mouth than on formal branding, a figure that rises to 78 per cent among owners 50 and over.
Closing that gap often starts with unglamorous software decisions, whether a straightforward CRM setup or a fuller ERP rollout fits the operation better, since that choice shapes exactly the kind of paper trail a buyer’s due diligence team goes looking for.
Preparation Now Separates Sellers From Closures
Owners thinking about selling in the next few years need to start well before the business goes on the market. Almond says preparation comes down to three things: healthy financials, streamlining the operation, and reducing reliance on the founder.
In practice that means clean financial records, no personal expenses run through the business, a client base spread across more than a handful of accounts, and systems documented well enough that the business keeps running without its owner in the room. Frank says the biggest misconception he sees is owners who believe a good sale simply happens once they decide to exit. “The best sales are prepared years in advance,” he says.
Caruso says AI has raised the stakes on that timeline rather than lowered them. “A business that runs on systems is more attractive than ever, and a business that’s really just the owner’s 60-hour week is discounted harder than ever,” he says.
If you just wake up one day and decide you’re going to sell, you’re probably not going to be able to.
That is Almond’s blunt summary of what happens to owners who wait. “Most businesses that go on the market don’t sell because they’re not in a saleable position,” she says.
What Happens When No Buyer Shows Up
Pete Seligman, an investor who runs the entrepreneurship-through-acquisition firm ETA Investor, says the arithmetic is unforgiving for businesses that clear neither bar, not RBA’s ideal mid-sized target, not Almond’s sale-ready checklist. “If we don’t provide a new owner operator for those businesses, a vast majority of them will just have to shut their doors because there’s no other appropriate buyer for those particular businesses in those circumstances,” he says.
He says tens of thousands of businesses shut up shop every year for that reason, and the effects reach past one owner’s retirement plans. “These are good businesses,” he says. “Without them there, they’re part of a supply chain and then they shut up shop and that supply chain will have to find that source somewhere else.”
Brokers say a well-prepared sale still takes four to nine months from listing to settlement. For the businesses that never reach that stage, the clock runs out somewhere else first.
Frequently Asked Questions
How many Australian businesses could close without ever finding a buyer?
The Australian Business Growth Fund identified 162,000 Australian businesses with annual revenue between $2 million and $100 million. More than two-thirds of them, over 100,000 businesses, are owned by someone of retirement age, and about two-thirds of those owners, roughly 60,000 businesses, have no succession plan in place, according to figures cited by investor Pete Seligman.
Is a search fund the same as a private equity buyout?
No. A search fund backs a single entrepreneur, known as the searcher, to find and buy one company and then run it personally as chief executive. Traditional private equity typically installs professional management and leans more heavily on financial restructuring across a portfolio of companies rather than hands-on operation of one business.
What does it cost to sell a business through a broker in Australia?
Commission commonly runs 5 to 10 per cent on businesses sold for under about $1 million, often with a minimum fee of $15,000 to $30,000, tapering to roughly 3 to 5 per cent on mid-sized deals. Engagement or listing fees typically add another $2,000 to $15,000 on top.
Is it better to sell a business without using a broker?
Some owners think so. Stuart Earl, who runs a business-sales-by-owner Facebook group with 123,000 members, says sentiment toward brokers is largely negative among sellers. Canberra broker Robert Illsley has pointed to a common fee structure, an upfront charge followed by a commission on sale, that he says can blunt a broker’s incentive to actually find a buyer quickly.
How much has business insolvency risen in Australia?
More than 11,000 companies entered external administration in the 2023 to 2024 financial year, according to ASIC data, a 39 per cent jump on the year before. Some of that rise reflects businesses closing not because they failed commercially, but because no successor was ready to take over.
