AUSTRALIA’S 2025 ELECTION: A TURNING POINT FOR BUSINESS SALES?

The recent re-election of the Albanese-led Labour government in May 2025 may have ushered in a new era of economic policy and market sentiment in Australia. For business owners contemplating a sale and prospective buyers eyeing opportunities, the next six months present a unique landscape shaped by anticipated interest rate cuts, evolving fiscal policies, and shifting investor confidence.

Interest Rate Cuts: Fuelling Business Acquisition Activity

The Reserve Bank of Australia (RBA) is poised to reduce the cash rate by 25 basis points to 3.85% at its upcoming meeting on May 20, 2025, following a previous cut in February. Forecasts suggest further reductions, potentially bringing the rate down to 3.1% by August and even 2.6% by early 2026.

Lower interest rates decrease the cost of borrowing, making it more attractive for buyers to finance business acquisitions. This environment encourages increased activity in the mergers and acquisitions (M&A) space, particularly among small to mid-sized enterprises (SMEs). As financing becomes more accessible, we can expect a surge in buyer interest, leading to a more dynamic business sales market.

Economic Policies: Creating a Conducive Environment for Business Transactions

The Labour government's economic agenda focuses on stability and growth, aiming to bolster investor confidence. Key initiatives include:

• Tax Reforms: Adjustments to small business tax rates and incentives are designed to stimulate investment and expansion.

• Infrastructure Spending: Increased government expenditure on infrastructure projects is expected to boost various sectors, creating ancillary opportunities for businesses.

• Support for Innovation: Grants and subsidies for technology adoption and research and development encourage businesses to modernise, enhancing their appeal to potential buyers.

These policies collectively create a favourable environment for business transactions, as they enhance the growth prospects and profitability of enterprises.

Projected Impact on Property Values

Market analysts forecast a national house price increase of 6-10% in 2025, driven by the combination of interest rate cuts and government incentives. Cities like Perth and Adelaide are expected to lead with up to 6% growth, while Melbourne may experience more modest gains.

The anticipated influx of first-home buyers in early 2026 could further accelerate price growth, especially in metropolitan areas with limited housing supply.

When the housing market rises, so in turn does equity and borrowing capacity. This has an immediate positive impact on buyer sentiment.

Buyer Confidence: A Catalyst for Market Activity

Buyer sentiment plays a crucial role in the business sales landscape. The combination of supportive economic policies, housing market growth, and anticipated interest rate cuts will lead to a resurgence in confidence among buyer in the next 6 months. This renewed optimism is already reflected in increased buyer inquiries and due diligence activities, signalling a robust pipeline of potential transactions in Australia

Moreover, sectors that demonstrated resilience during economic downturns, such as healthcare, technology, and essential services, are garnering heightened interest. Buyers are actively seeking opportunities in these areas, anticipating sustained demand and growth.

Strategic Considerations for Sellers and Buyers

For Sellers:

• Timing the Sale: With market conditions becoming increasingly favourable, initiating the sale process in the next six months could maximise valuation before the market gets too flooded with sellers.

• Enhancing Business Appeal: Investing in operational efficiencies, updating financial records, and demonstrating growth potential will make a business more attractive to prospective buyers.

For Buyers:

• Securing Financing: Taking advantage of lower interest rates to secure favourable financing terms can enhance purchasing power.

• Conducting Thorough Due Diligence: Assessing the impact of recent economic policies on target businesses is essential to make informed investment decisions.

The intersection of anticipated interest rate reductions and revitalised Buyer confidence positions the Australian business sales market for significant activity in the coming months. Both sellers and buyers stand to benefit from these developments, provided they approach transactions strategically and remain attuned to the evolving economic landscape.

Need guidance on preparing your business for sale or navigating a current deal? Reach out to professionals who understand the nuances of mid-market deals, like Vision Brokers and Advisors, to give your deal the best chance of crossing the finish line.