Five small cap takeover candidates

After a period of relative quiet, public merger and acquisition (M&A) activity on the ASX roared back to life in 2024. The number of deals hit a decade high. And there are good reasons to think the momentum will continue through 2025 and into 2026 — particularly at the small-cap end of the market.

A few macro tailwinds are aligning. Interest rates are heading lower, both in Australia and globally, improving the cost of capital and restoring confidence in risk-taking. Equity markets are surging again. And changes to Australian merger laws are set to come into force in early 2026, which may see deals accelerated to avoid a more cumbersome process under the new regime.

Global private equity still has near-record levels of “dry powder” to deploy. With the Australian dollar still weak and many small caps trading at steep discounts to historical multiples, the ingredients are there for a busy year.

Already in Play

Forager’s Australian Shares Fund only owns 31 stocks. Three of them are currently under takeover offers.

One well progressed is the battle for online bookmaker PointsBet (ASX: PBH). Japanese group MIXI (TSE:2121), armed with a cash-heavy balance sheet, is in the mix alongside Australian challenger Betr (ASX: BBT). In late April, Betr had little trouble raising $130m in fresh equity to fund the cash component of its tilt. Cost reductions across technology, marketing and labour mean the company expects more than $40m of synergies should the deal consummate. Mixi fired back with an upped $1.20 cash bid and will attempt to circumvent Betr’s pre-bid blocking stake by committing to an alternate structure if the current one (which requires 75% of voting shareholders to approve it) fails. That meeting will be held next week.

Natural disaster remediation company Johns Lyng (ASX: JLG) is in the crosshairs of private equity player Pacific Equity Partners (ASX: PEP). In an uncommon and shareholder unfriendly twist, investors are still waiting to learn the price PEP proposed to secure its exclusive due diligence. Less surprisingly, the proposed deal has been structured to allow the management team, headed by major shareholder Scott Didier, to retain an interest in the business.

Capervan sale and rental business Tourism Holdings (ASX: THL) is also the subject of a private equity bid, this time by BGH Capital. The Trouchet brothers, who had merged Apollo Tourism and Leisure into Tourism Holdings three years ago and are 12% shareholders, are backing the bid. THL has been driving over plenty of potholes. Most recently, geopolitical tensions caused a reduction in US inbound travel and another downgrade in earnings expectations. The price here has thankfully been disclosed, clocking in at a chunky 58% premium to the deeply depressed last traded price.

All three are good examples of how takeover interest can emerge from offshore corporates, local competitors and cashed-up private equity firms. 

Some major shareholders, especially when they continue to be involved in the business and bemoan a lack of investor appreciation on the ASX, become good partners for acquirers to speak to ahead of any bid.

Businesses in Our Portfolio Worth Watching

They are unlikely to be the last three takeover offers we receive. Several companies in the Forager Australian Shares Fund portfolio are ripe for acquirers, and a few have already seen interest in the past. Here are five we think could appear on dealmakers’ radars in the year ahead.

1. Tyro Payments (ASX: TYR)

Tyro operates Australia’s largest non-bank network of payment terminals, servicing over 73,000 merchants in healthcare, hospitality, and retail. The business grew gross profit by 7% in the first half of the 2025 financial year while expenses remained well under control. Earnings were 21% higher and guidance for the year was reaffirmed. The business is on solid footing once again and valuations are attractive.

The Australian Financial Review recently reported that private payments provider Stripe was taking a look at Tyro, and it's not hard to see why. Tyro would give the international payments business instant scale in Australia and a powerful distribution network for Stripe’s online payments products. This wouldn’t be the first time Tyro has been in the crosshairs of acquirers. In late 2022 private equity player Potentia and Westpac (ASX: WBC) were working to acquire the business. At the time Potentia bid $1.60, an almost 80% premium to where Tyro stock trades now. With the departure of Tyro’s CEO over the next few months, the door is ajar for an acquirer.

2. ReadyTech (ASX: RDY)

ReadyTech is a vertical software business serving education, workforce, and government clients. It generates strong recurring revenue but has seen a moderation in growth recently. What was expected to be a revenue growth percentage in the “mid-teens” is now more like “high single digits”. The share price is off 30% from recent highs.

But the business continues to grow and should improve margins next year. Clients rarely turn the product off, with churn at only 4%. And there is scope for growth to either accelerate or for costs to be cut.

Potential acquirers would be well versed in what can be done. The business was subject to a takeover approach from Pacific Equity Partners in 2022, with the current share price at about half of the bid price. Existing 32% shareholder Pemba Capital has been invested for years longer than one would have expected. While supportive, it’s not unreasonable to think they might be open to an exit at the right price.

3. RPMGlobal (ASX: RUL)

A home-grown global software leader, RPMGlobal develops enterprise software for the mining industry. It was the Fund’s largest investment for a long time, and the business has continued to grow. The valuable and low-churn subscription software revenue stream was up 22% in the last half-yearly result.

Unlike some of the other candidates on this list, RPMGlobal is trading close to all-time highs. But it is a strategic asset that has been managed with one eye on sale for many years.

Selling its advisory division at a healthy price has left the business with a clean, sticky, recurring revenue stream which could be attractive to industry players and private equity buyers alike. Plainly disclosing remaining corporate costs mean synergies for potential acquirers are clear.

A competitor, Micromine, was acquired at ten times revenue recently by engineering behemoth Weir (LON:WEIR). This valuation would imply a very healthy premium for RPM Global. The vast majority of the company’s competitors have changed hands over the last few years. RPM could be next on the radar of acquirers.

4. Praemium (ASX: PPS)

Investment platform player Praemium has a strong position in the high net worth and separately managed accounts platform niche. It received a bid from competitor Netwealth (NWL) in 2021, which was ultimately rejected. Nearly four years later Praemium is trading at about half of the deal’s implied value at the time. Since then, the logic for platform consolidation hasn’t weakened.

Praemium hasn’t stood still since then. The last quarter showed healthy net inflows onto its platforms. The launch of the newest platform, Spectrum, garnered $440m of net inflows in the quarter, a strong result. And profitability is set to rise from organic revenue growth and operating leverage, paired with synergies from a recent acquisition of its own. Trading at one-third of the valuation of its larger peers, Praemium may be too attractive for acquirers to pass up.

5. Experience Co (ASX: EXP)

Experience Co operates adventure tourism businesses, including skydiving and reef experiences. After years in the doldrums trying to recover from COVID, the business ran a strategic review last year. The process attracted inbound interest but it was ultimately too early for the potential acquirers to price a full recovery. The business stayed the course and went about fixing its operating performance.

So far this financial year earnings have rebounded strongly - up 33% year-on-year as tourism volumes recover and pricing rises modestly. 

Of every revenue dollar booked so far this year, 70% has made its way to earnings. It remains a scalable business with valuable assets and would make sense in the hands of a larger tourism group or private equity buyer looking for a platform for further acquisitions.

A Window of Opportunity

Not all merger and acquisition speculation leads to action. Deals are hard to pull off - especially in the public market, where valuation gaps, regulatory hurdles and board dynamics can all scupper even well-funded bids. But with capital available and other factors encouraging action, 2025 could see many small-caps in the sights of acquirers.

The potential for a takeover at a healthy premium is a nice kicker when the fundamentals are strong, the valuation is attractive, and the assets have strategic value. With our focus on the unloved and underappreciated, we think we hold a few of those. Let’s see if would-be acquirers agree.

Forager has a successful history of investing in businesses that eventually get taken over. Subscribe to our monthly and quarterly reports if you are interested in finding out more about how we identify new stocks.

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