Buying a business in Australia – advice from a market insider

A shared language, similar culture, a track record for economic stability and good growth prospects make Australia a ‘go-to’ country for many UK buyers pursuing strategic expansions and consolidations.

However, despite the similarities, there are some nuances that buyers need to be aware of, as we know from our own experience advising UK companies entering the Australian market. Here, we highlight some factors to look out for and give a real-life example – the acquisition of the Australian firm Biosis by UK-based APEM, a deal on which we advised working closely with DSW.

What are some of the differences?

Nuances to look out for include:

• Long Service Leave (LSL) – this bonus holiday entitlement for individuals serving over 10 years of employment may be unfamiliar to many UK acquirers but can be a significant liability that should be incorporated as part of the purchase price adjustments. Some privately owned businesses also do not report it in their financials, so it needs to be covered in the due diligence workstreams.
• Superannuation (pensions) – another critical area requiring due diligence from a regulatory and financial liability perspective. Employers pay guaranteed superannuation contributions on top of employee gross wages. The rules regarding employee, casual staff and contractor payments can be complex and require input from specialist tax advisers.
• Liability regime – warranties and indemnities are a common feature of M&A deals and aim to ensure appropriate liability levels and procedures are in place between buyers and vendors in the event of future claims. Understanding the distinction between fundamental, taxation and general warranties is crucial for all parties involved. Often Australian M&A transactions have varying liability limits depending on the type of warranty – it is not just capped at the total purchase price.

Which sectors are of particular interest to UK buyers?

Environmental consultancy is experiencing significant growth, especially with the strong focus on renewable energy, Australia’s net zero ambitions and the increasing need for more housing. Substantial investments in infrastructure projects are creating a boom for environmental consultancies that specialise in ecology and habitat work, assisting developers in obtaining planning consent and navigating complex regulatory environments.

Software and technology remain a key part of Australian mid-market M&A, with the sector contributing 20% of all deal volume in the first half of 2024. Australia’s venture capital and private equity market has been expanding over the past decade, and favourable R&D tax cash flow incentives are available to tech companies building proprietary products and solutions. Home-grown success stories such as Atlassian, Canva and Wisetech have put the Australian tech scene on the international map and encouraged strong cohorts of future businesses and leaders in the space.

How did the deal work in practice?

This was a co-advisory mandate partnering with DSW to guide APEM through the financial and commercial complexities of the deal. Given the transaction’s global scope, we divided responsibilities by time zone.

The DSW team, with their longstanding strong relationship with APEM, acted as lead advisor and managed stakeholder engagement with the PE funder, WestBridge. Our focus was on overseeing due diligence streams covering tax, legal, commercial and insurance aspects with teams based in Australia. We coordinated five firms and around 40 individuals, ensuring smooth information flow and efficient query resolution.

Biosis, the Australian target, had its own advisor. We served as an important ‘time zone’ link between them, APEM and DSW in the negotiations. Despite segmented roles and responsibilities, we worked closely with DSW to ensure alignment with APEM’s requirements and incorporation of local transaction norms.

How are you finding being a member of Pandea Global M&A?

We are now in our third year, and it has been very beneficial to our firm. As former Big Four and investment banking professionals, we pride ourselves on our senior-led and personable approach. Partnering with Pandea was a seamless transition as we’ve encountered like-minded individuals throughout the Pandea network. Their consistent focus on the mid-market and delivering high-quality advice aligns with our philosophy and also acts as a strategic resource for our clients seeking to engage with international counterparts.