I recently saw an interesting interview on the ABC where Terry Rawnsley, an urban economist (yes that is a thing), spoke about retirement. It turns out the average retirement age for Australians is the highest it’s been since the 1970s with apparently 20% of new employment since 2019 being people aged 55 and over.

The average retirement age for men in 2022-2023 was 66.2, and for women it was 64.8. If this trend continues, we could see the retirement age nearing 70 within the next 50 years. This is good news as improved health care provides more active years for many. Nevertheless, old father time is relentless and the largest movement of business wealth is well underway.

At Oasis Partners we are seeing about half our transactions are shareholders selling for retirement, age related or health reasons. The other half are selling for other reasons such as wanting a change or feeling that a merger would provide benefits at their particular stage of the business lifecycle.

The baby boomers are now retiring – that’s those born in 1964 or earlier. We know that about 20% of medium sized business owners (employing 5-200 staff) are already age 60 or over and very few will be succeeded in the business by their children. This suggests about 6,000 companies per annum coming to the market in the next decade.

When we do our own analysis, we typically double that number to include the non-age-related companies expected to sell each year. Unfortunately, at this stage there are just not enough buyers. Of the 4,500 operating companies in Australia who employ over 200 staff, we estimate that no more than 2,000 acquire regularly as part of their strategy. So, even after allowing for overseas buyers, what is left is a significant imbalance.

We see tremendous opportunities for strategic acquirers to engage with the private market to present solutions to the owners of, in many cases, very valuable companies, by intelligently acquiring or merging and creating significant value in the process.

We do not believe this imbalance will remain in place permanently. The free market is very adept at finding opportunities and filling the market gaps. We are already seeing a significant move from Private Equity in Australia who are showing much more breadth and flexibility around what they are prepared to consider in terms of size and features. We are also seeing private capital and experienced management coming together to acquire business assets.

The future is never certain, but one thing always seems true – hard work and creativity seem to deliver in a free market. If you are a buyer of businesses, talk to myself or one of my colleagues. We are very active in Australia, representing the shareholders of established private companies wishing to exit. 

          Good luck and stay safe.                                                            

References:

       [1]  ABC News – https://www.abc.net.au/news/2024-04-09/retirement-age-increasing-according-to-kpmg-analysis/103684488

       [2] Counts of Australian Businesses 2020-22, Australian Bureau of Statistics, 20 May 2022

       [3] Small Business Counts 2020 v2, Australian Small Business and Family Enterprise Ombudsman, December 2020.