FY26 M&A review: five ways prepared businesses secured stronger outcomes
A selective market rewarded transaction readiness
Preparation, more than optimism, decided outcomes in the Australian M&A market in FY26.
Businesses that entered the market with reliable financial information, a credible growth plan and clear answers to likely buyer questions attracted serious interest and held their value through due diligence. Businesses that relied on favourable conditions to carry the process met longer timelines, tighter conditions and, often, a lower net result.
FY26 therefore resists description as either a strong or a weak year. It was a selective one. Capital remained active while buyers applied greater discipline to where and how they deployed it. Industry and business size mattered less than the quality of the opportunity and the seller's readiness to execute.
For SME owners weighing a sale, acquisition or capital raise, the implication carries real financial consequences. Transaction value is increasingly determined by work completed well before a business formally enters the market. That principle sits at the centre of Morgan Shaw Advisory's EBITDA+ SIX STEPS TO SUCCESS™ framework, and it runs through the five observations below.
Why M&A preparation mattered in FY26
The market environment stayed complex throughout the year.
Financing conditions continued to shape valuations and transaction structures. Contrary to the easing many owners expected, the Reserve Bank tightened, lifting the cash rate three times before holding at 4.35 per cent in June as inflation reaccelerated. Higher capital costs narrowed the distance between an ambitious asking price and what a disciplined buyer will fund.
Geopolitical uncertainty, changing trade settings and uneven economic conditions also weighed on investor confidence, a backdrop we examined in our look at global growth and political crosswinds. None of this brought Australian dealmaking to a halt. It did push buyers to place greater emphasis on resilience, evidence and execution risk.
The split between large transactions and the mid-market became one of the defining features of the year. Large deals supported headline activity while the mid-market absorbed the harder conditions, a pattern we described in July 2025 in Australia's M&A market: a tale of two halves. The figures bore that out. Completed mid-market transactions fell by around 13 per cent in the third quarter of FY26 against the same quarter a year earlier, average deal value dropped by 12 per cent, and deals under $100 million accounted for 83 per cent of activity, up from 73 per cent.
Inbound interest remained a genuine source of demand. Foreign buyers accounted for close to half of total Australian deal value over the past year, with United States, Canadian and Japanese capital leading, a theme we explored in our M&A roundup. We also reported active international investment in Australian mining, technology, insurance, cyber risk and financial services assets in our update on inbound M&A into Australia.
Regulation added a further layer. From 1 January 2026, Australia introduced a mandatory and suspensory merger control regime. Acquisitions that cross specified thresholds must now be notified to the ACCC and cleared before they can complete. In its first three months the regime drew 50 notifications and 108 waiver applications, which confirms it as part of everyday deal planning rather than a large-cap concern alone. For sellers, the practical effect is a longer runway and a higher premium on having the house in order early.
Active demand, disciplined deployment. Opportunities remained available, and buyers had both the reason and the time to investigate them properly.
What drove stronger M&A outcomes in FY26
1. Buyers stayed active and applied tighter filters
Buyers had capital throughout FY26. What mattered was which businesses could satisfy their investment criteria.
Strategic acquirers and private capital continued to pursue opportunities, particularly where an acquisition carried a clear commercial rationale. Around a dozen Australian mid-cap private equity managers have been fundraising or preparing to launch, with mandates pointing squarely at the $10 million to $200 million range where most established Australian SMEs sit. That money has to be deployed.
Alongside it came closer attention to financial quality, regulatory exposure, operational resilience and the risks involved in completing and integrating a transaction, a pattern we tracked across our weekly market updates. In April 2025 we identified increased use of private capital, more thorough due diligence, heightened regulatory scrutiny and deferred consideration mechanisms designed to address valuation gaps, in our M&A insights update.
For sellers, an attractive headline valuation became only one component of a successful outcome. The likelihood of completion, the conditions attached to an offer and the timing of consideration mattered just as much. A high price carrying extensive conditions, a demanding earn-out or significant deferred consideration can produce a weaker commercial result than a slightly lower offer with greater certainty. Owners need to assess the substance of an offer rather than the number on its first page.
2. Quality had to be evidenced
Buyers still paid for growth in FY26, provided the claim arrived with evidence behind it.
Businesses were better positioned when they could explain clearly:
how revenue is generated and whether earnings are repeatable
how margins have moved over time, and why
where customer or supplier concentration exists
which systems and processes support scale
how dependent performance is on the owner
where future growth will come from, and what investment it requires
Preparing this material before engaging buyers lets an owner control how the business is presented and address weaknesses before they surface in negotiations. It also separates serious buyers from parties seeking information without a credible intention or capacity to transact.
The strongest businesses supported their narrative with financial records, operating information and a strategy that withstood examination. A polished story never compensated for gaps underneath it.
3. Due diligence became part of the value discussion
Due diligence is often treated as a stage that follows agreement on price. In practice it determines a meaningful portion of the value ultimately received.
A buyer will revise an offer, seek additional protections or withdraw where the information supplied during diligence fails to support the assumptions behind its initial proposal. Incomplete records, inconsistent reporting and slow responses erode confidence even when the underlying business is sound. Momentum is difficult to recover once lost.
Our guidance to clients has been consistent on this point. Disciplined management of the process, accurate information and comprehensive responses to buyer enquiries protect value. The depth of diligence a buyer runs is itself influenced by the complexity of the business, the completeness of what has already been supplied and any discrepancies discovered along the way. Gaps invite scrutiny, and scrutiny invites price adjustment.
Preparing early protects negotiating leverage. Treating it as an administrative exercise gives that leverage away.
4. Deal structure carried more weight
In a disciplined market, buyers use transaction structure to manage uncertainty.
Deferred consideration, earn-outs, conditions precedent and similar mechanisms allocate risk between buyer and seller. None of them is inherently adverse. In the right circumstances they bridge a genuine difference in expectations and get a deal done that would otherwise have failed.
Structure does need careful assessment. Owners should establish:
how much consideration is certain, and when each payment falls due
which events could reduce or delay payment
how performance will be measured, and under whose accounting policies
who controls the business during an earn-out period
what the owner's post-completion responsibilities are, in writing
how disputes will be resolved
Certainty, timing, risk allocation and post-transaction obligations all shape the quality of an outcome. Two offers carrying the same headline number can deliver very different results to the person selling.
5. Preparation created competitive tension
A prepared business gives an adviser room to run an orderly process.
Where financial information, management materials and transaction documents are ready, credible buyers can assess the opportunity within a consistent timeframe. Offers become comparable, and avoidable delays stop draining momentum.
Competitive tension is difficult to sustain when each buyer receives different information, management spends weeks answering routine questions, or material issues emerge late. Preparation is what makes a competitive process possible in the first place, and competition is what moves price.
Better businesses, not better markets
One of the more useful lessons from FY26 is that waiting for conditions to improve is not an exit strategy.
Easier financing may support valuations. Greater economic confidence may bring more buyers to the table. Neither will resolve weak reporting, customer concentration, owner dependence or an unsupported growth plan. Those problems travel with the business into every market.
In a selective market, capable buyers can afford to wait, and they are waiting for businesses that fit their strategy and meet their standards rather than for the market to become uniformly easier.
This creates a contrarian opportunity. A demanding market thins the field of businesses able to run a credible process. The owner who has done the preparatory work stands apart from less organised opportunities and negotiates from a stronger position than the same owner would command in a crowded, easier market. Difficult conditions favour the prepared.
Two similar businesses, two different outcomes
Consider two businesses of comparable size in the same sector.
The first starts preparing well before a proposed transaction. Management improves the consistency of monthly reporting, documents adjustments to earnings, reduces customer concentration where possible and builds a properly costed growth plan. Key contracts and corporate records are organised, and likely diligence questions are identified before buyers receive anything.
The second approaches the market with its records in their current state. Financial questions are answered as they arise. Important contracts take time to locate. Forecasts reflect management ambition without a documented delivery plan behind them.
Both businesses are profitable. Both attract initial interest.
The difference emerges as buyers test the information. The first gives buyers a clear basis on which to assess performance and risk. The second asks buyers to make assumptions. Buyers rarely pay a premium for uncertainty, and where uncertainty cannot be resolved they respond through price, conditions or structure. Same market, same window, materially different outcome.
How MSA prepares businesses for a selective market
FY26 reinforced the relevance of the EBITDA+ SIX STEPS TO SUCCESS™ framework.
The process begins by measuring the gap between where a business stands and where it needs to be to support the owner's objectives. It then establishes a strategic plan focused on the areas that genuinely contribute to value, assigns responsibility for implementation and monitors progress against deadlines.
Our methodology places particular weight on building a plan around what prospective buyers value, rather than developing a strategy in isolation from the future market for the business. Clear responsibilities and real oversight are what turn a plan into measurable action.
For an owner considering a transaction, an exit readiness assessment examines:
financial performance and quality of earnings
revenue and customer profile, and competitive position
management capability and owner dependence
operating systems, processes and intellectual property
legal, commercial and regulatory risks
the strength and credibility of the growth plan
the availability and organisation of transaction information
The purpose is to improve the business so the owner has more options when an opportunity arises, rather than to predict a perfect moment to sell.
Five actions to take before FY27 progresses
Test the quality of your financial information. Confirm that management reporting, statutory accounts and operational data tell a consistent story. Identify unusual, one-off or owner-related expenses early and document the basis for any proposed earnings adjustments. A buyer should be able to trace the numbers without lengthy explanation from the owner.
Replace growth ambition with a delivery plan. A credible growth strategy explains where growth will come from, what capabilities it requires, who is accountable and how progress will be measured. It should be legible to a buyer who has not spent years inside the business.
Identify concentrations and dependencies. Review reliance on major customers, suppliers, employees, systems and the owner. Not every concentration can be removed, but each one should be understood, quantified and paired with a practical mitigation plan.
Prepare for diligence before a process begins. Organise financial, legal, commercial, operational and employment information in advance. Decide what can be shared during initial discussions, what should be released only in formal due diligence, and what sensitive material requires additional safeguards. A staged approach gives buyers enough to move while protecting the business.
Assess timing through the lens of readiness. Weigh external conditions against the readiness of the business, the strength of recent performance, the credibility of the growth outlook and your own objectives. A favourable market will not compensate for preventable weaknesses inside the business.
Looking ahead to FY27
FY27 opens with real opportunities for well-positioned Australian businesses, and little reason to assume buyer discipline will fade.
Deal activity continues across key sectors, inbound investment remains strong and private capital is still seeking opportunities, as our capital markets wrap set out through the year. Active inbound investment, sector-specific acquisition interest, more rigorous due diligence, creative transaction structures and heightened regulatory attention all point to the same planning assumption. Buyers will keep transacting while continuing to scrutinise risk closely. The mandatory merger regime adds time to the process, which makes early preparation more valuable rather than less.
Owners should avoid building an exit plan on the expectation that the market will eventually do the difficult work for them. A stronger negotiating position comes from reliable information, reduced risk, a credible strategy and disciplined execution, and every one of those advantages is developed before a buyer appears.
Prepare your business for its next transaction
If you are considering a sale, acquisition or capital raise in the next 12 to 24 months, start by establishing how closely the business meets the expectations of today's buyers.
Explore MSA's latest resources and market updates, review our thought leadership papers, or book a call with the MSA team to discuss your objectives and the practical steps required to prepare.
The strongest transaction outcomes are built well before anyone reaches the negotiating table.