Acquisition Finance 2025

AUSTRALIA Trends and Developments Contributed by: Lewis Grimm, Alastair Gourlay, Dean Bao and Emily Tsoi, Jones Day

Sector dynamics and funding differentiation Certain sectors are seeing differentiated acquisi- tion finance structures based on sponsor appe- tite and lender risk perception. • Healthcare and aged care – defensive char- acteristics, government-backed demand and steady cashflows make these prime targets for private credit. • Tech and software – cashflow variability and growth-oriented models attract funds willing to structure around annual recurring revenue (ARR) or subscriber-based metrics. • Resources and infrastructure – these require more bespoke structuring, often with a blend of project finance, equity backfill and multi- tranche debt. Lenders with sector expertise are commanding more influence in terms negotiation, particularly where covenant calibration, working capital sup- port, or post-completion integration are key. Healthcare and aged‑care lenders may demand contingency reserves to cure licence breaches but stretch leverage for government‑backed earnings. Some technology financiers now accept annual‑recurring‑revenue covenants up to AUD300 million, applying a prudent haircut to cushion churn risk. Resources and energy spon- sors pair senior secured debt with mezzanine instruments that share upside on commodity prices, a structure favoured by United States investors keen on critical‑mineral supply chains. Renewable energy developers see strong appe- tite for private credit and mezzanine tranches as Australia accelerates its energy transition. Tailoring covenants to sector‑specific cash‑flow rhythms improves both pricing and execution certainty.

energy and infrastructure assets, further embed- ding ESG metrics in deal structuring. Key features: • Margin adjustments tied to metrics such as carbon intensity, gender diversity, or govern- ance KPIs. • ESG disclosures required under IFRS S2 beginning in 2025. • Verification and audit of KPIs increasingly treated as mandatory. The mid-market: agile, competitive and globalising Most of the action in 2025 sits in the AUD100– 500 million deal range. This space is increasingly attractive to global sponsors pursuing bolt-ons, carve-outs or expansion strategies. Key characteristics: • Speed over pricing – sponsors are often pre- pared to pay a margin premium in exchange for fast execution and fewer closing condi- tions. • Flexibility over scale – smaller deals do not justify syndication costs, making unitranche or bilateral private deals more attractive. • Global terms, local layers – sponsors are importing New York or European LMA prec- edent docs, but relying on local counsel to make them work under Australian insolvency and enforcement law. This segment is where terms are most hotly con- tested. Sponsors with large local portfolios tend to win the flexibility they seek.

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