Private equity has been quiet in Australia for two years. Deal flow dropped, rates rose, and funds sat on dry powder waiting for valuations to correct. That cycle is turning.

EY's March 2026 global PE report shows exit activity up 57% by deal value in 2025. Eighty percent of PE exits went via trade sale — but that rebound means funds are now raising new vehicles and need to deploy. Australian GPs are watching: 61% expect increased exit activity in 2026, according to Cherry Bekaert's annual PE survey.

What that means for Australian business owners: PE buyers are back in the market. But they screen hard, move fast on the first filter, and kill deals for reasons that most sellers never see coming.

This article explains what PE buyers are actually looking for — and what you can do now to either position your business for PE attention or rule it out early.

Why PE Buyers Are Different From Trade Buyers

A trade buyer acquires your business to integrate it. They're buying customers, geography, IP, or capacity. They can afford to pay synergy premiums because the combined entity is worth more than the sum of the parts.

A PE buyer acquires your business to grow it and sell it again. Their model is financial: buy at a reasonable multiple, add management capability or bolt-on acquisitions, improve margins, then exit at a higher multiple in 3–7 years. Every decision flows from that math.

That distinction drives everything PE buyers do during diligence — and everything they screen for before they even take a meeting.

The PE return model: A PE fund typically targets a 2.5–3.5× return on invested capital over a 4–6 year hold. If they pay 5× EBITDA, they need to either grow EBITDA significantly or exit at 6–7× EBITDA (or both). Every screening question maps back to whether that math is achievable.

The First Screen: What Gets You a Meeting

PE funds receive hundreds of information memoranda per year. Most are filtered by an analyst in under 20 minutes. The criteria for passing first screen are consistent across most Australian lower-mid market PE ($10M–$150M EV):

1. EBITDA margin above ~15%

This is a rough threshold, not a rule. But below 15% EBITDA margin, PE buyers start questioning whether the business has pricing power or whether cost structure is a fundamental problem. Professional services, software, and specialist distribution businesses often pass. Thin-margin trading businesses often don't.

2. Revenue predictability

Recurring revenue — retainers, subscriptions, long-term service contracts, repeat transactional customers — dramatically reduces perceived risk. PE buyers will pay a meaningful multiple premium for a business where 60%+ of next year's revenue is already contracted or historically predictable.

3. Size: typically $2M+ EBITDA for institutional PE

Australian PE funds with $100M+ AUM typically won't look at businesses below $2M EBITDA — the transaction costs (legal, advisory, management time) don't justify it at smaller scale. Below that threshold, search funds, self-funded searchers, and family offices are the likely buyer pool.

4. A management team that isn't just the owner

PE buyers are not buying a job. If the business requires the founding owner to operate, that is a structural problem that will kill deals or severely compress multiples. PE needs a leadership team capable of executing the growth plan post-acquisition — even if the seller stays involved for a transition period.

5. A platform growth story

PE loves businesses that can be scaled via bolt-on acquisitions — add-ons in adjacent markets, geographies, or service lines. A business that is naturally the "anchor" in a fragmented industry is highly attractive. This is why aged care providers, veterinary chains, accounting consolidators, and specialist trade businesses have attracted PE in recent years.

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What PE Due Diligence Actually Focuses On

Once past first screen, PE diligence is more structured and more forensic than a typical trade sale process. Expect:

Financial quality of earnings (QoE)

PE buyers will commission an independent QoE report from an accounting firm. The QoE tests whether your EBITDA is "real" — normalised for owner benefits, one-off items, related-party transactions, and working capital movements. Sellers who present clean, well-documented financials with clear add-back schedules get through QoE faster and with fewer price adjustments.

Common QoE findings that hurt sellers: owner salary below market (inflates EBITDA), discretionary expenses run through the business, revenue recognition timing that flatters short-term numbers, or customer concentration that makes revenue fragile.

Customer concentration

A single customer representing more than 20–25% of revenue is a significant risk flag. Above 30–35%, PE buyers will either discount heavily or structure earnout provisions that put revenue concentration risk back on the seller. If you have concentration, the fix is building out the rest of the customer base — ideally 18–36 months before approaching buyers.

Working capital normalisation

PE deals typically include a working capital adjustment mechanism. The buyer sets a target working capital level (usually based on a 12-month average), and if actual working capital at completion differs from target, the price adjusts. Sellers who haven't modelled their own working capital position often get surprised at settlement.

Management retention and incentives

PE buyers will want key management locked in post-acquisition — typically through a combination of employment contracts, retention bonuses, and equity rollovers. If the management team is thin, or if key people are unlikely to stay under PE ownership, the buyer will price that risk in.

The Rollover Question

Most Australian PE deals involving a founder-owned business will include a request for a partial equity rollover — typically 10–30% of the transaction value reinvested into the new PE-backed entity.

PE buyers ask for this because it aligns incentives: if the seller believes in the business, they'll keep skin in the game. It also reduces the upfront capital the PE fund needs to deploy.

For sellers, a rollover is a genuine wealth-creation opportunity — but only if the PE fund executes the growth thesis. The rollover equity is illiquid until the next exit (3–7 years). If the fund underperforms or the business deteriorates, the rollover could be worth significantly less than original expectations.

Rollover rule of thumb: Sellers who rollover at a $10M valuation and exit at a $25M valuation (2.5× growth) on a 25% rollover position receive an additional $3.75M on the second exit. That's a meaningful outcome — but it requires trusting the PE firm's ability to execute.

What Gets Deals Killed After Initial Screening

The most common late-stage deal killers in Australian PE acquisitions:

  • Undisclosed liabilities surfaced in diligence — employee entitlements, tax disputes, legacy environmental issues, or pending litigation that wasn't in the IM
  • Revenue that doesn't hold up under scrutiny — customer churn rates higher than presented, contracts not as firm as described, or key customer relationships that are personal to the owner
  • Management team weakness — second-tier leadership that cannot articulate the business's strategy or operational drivers when interviewed by PE
  • Owner dependency — discovered during diligence that the business can't function without the founder's daily involvement
  • Financial systems that can't support scale — outdated accounting, no management reporting, no KPI dashboards

Almost all of these are fixable — but they take 12–24 months to genuinely address. Sellers who try to paper over these issues in an IM, hoping they won't be discovered, invariably find them surfaced in QoE or management interviews. The result is either a significant price reduction or a collapsed deal.

PE vs Trade Buyer: A Simple Decision Framework

Factor Lean PE Lean Trade
You want maximum upfront price ✓ Trade buyers pay synergy premium
You want to stay involved post-sale ✓ PE often retains founders
You want a second bite (rollover equity) ✓ PE structures allow this
Your business is a platform for consolidation ✓ PE loves buy-and-build
You want to protect staff and culture ✓ PE keeps team intact
Clean exit, done deal, walk away ✓ Trade buyers often prefer clean exits
Business EBITDA below $2M ✓ PE unlikely to engage

Preparing for PE: What to Do in the 18 Months Before Approaching

If PE is the right buyer type for your business, the work starts well before you engage an adviser or open a process. The businesses that attract PE and command strong multiples share a common trait: they were prepared.

Practical steps:

  1. Reduce owner dependency. Document your role. Delegate operational decisions. Identify and develop second-tier management. PE needs to see a business that can run without you.
  2. Build recurring revenue. Move customers onto contracts where possible. Introduce retainer arrangements, service agreements, or subscription models. Even small improvements in revenue predictability shift PE's risk perception.
  3. Clean the financials. Three years of clean, auditable accounts with properly documented add-backs. No personal expenses running through the business. Market-rate owner salary included in the P&L.
  4. Fix concentration. If you have customer concentration above 25%, diversify actively. A pipeline of smaller customers built over 18 months can materially de-risk the business in PE's eyes.
  5. Build the growth story. PE wants to know what the business looks like in 5 years. Think about adjacent markets, bolt-on acquisition candidates, or geographic expansion opportunities. Document this — it becomes part of your IM.

The Australian PE Market in 2026

Australian PE activity dropped sharply in 2024–2025, with William Buck reporting only 720 completed deals — a 10-year low. But 74% of those deals were sub-$50M, confirming that lower-mid market deal flow continued even as large-cap activity stalled.

As interest rates normalise and dry powder pressures fund managers to deploy, 2026 is widely expected to see increased activity. For sellers who have spent the last 12–18 months preparing, the timing is favourable: buyer appetite is building just as the ownership transfer wave — Australia's estimated 60,000 retirement-age business owners — is accelerating.

The sellers who benefit most will be those who arrived prepared. The sellers who sell into this market with unresolved owner dependency, thin management teams, and undocumented financials will either transact at discounts or not transact at all.

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Key Takeaways

  • PE exit activity is up 57% globally — funds are deploying fresh capital in 2026
  • Australian PE concentrates in the $10M–$150M EV range; below $2M EBITDA, search funds are more likely buyers
  • PE screens hard on: margin, recurring revenue, management depth, owner independence, and platform potential
  • QoE diligence is forensic — clean financials with documented add-backs are essential
  • A partial rollover can significantly increase total returns but carries illiquidity risk
  • The 18 months before a PE process are the most important — preparation determines price

Related: Private Equity vs Trade Buyer: Which Is Right for Your Australian Business? | Trade Buyer vs Private Equity vs Search Fund | How Much Is My Business Worth?