The founder transition: A growing private equity opportunity

The Opportunity

A significant number of Australian businesses are about to change hands, whether or not their founders have planned for it. More than 500,000 businesses in Australia are in the hands of owners aged 60 or older (Source: ABS Counts of Australian Businesses) and roughly 48% of business owners aged 60 to 78 intend to exit their business within one to five years (Source: MYOB Business Monitor).

Where do these businesses go once the founder retires and who will take them on?

Being taken over by a competitor or business in an adjacent sector is an option; however, these founder-led businesses often share characteristics that can deter trade buyers: key customer relationships remain with the founder, there is no strong second layer of management because there has never needed to be one, systems are outdated and core processes are stored in the minds of long-standing employees, rather than documented or clearly mapped out. Most of these business owners do not have a documented succession plan (Source: MYOB Business Monitor) and handing over to family members is often constrained by a lack of appetite, capital, or both.

What these founders need are partners that:

• Have the capital backing to take a majority stake in the business, allowing the owner to step back or fully retire, and to fund capital expenditure, acquire and ‘bolt on’ smaller complementary businesses or develop products for new markets;
• Have the expertise to look beyond opaque processes, financial statements that have not yet been made ‘investor-ready’ and thin management structures; and
• Can articulate a clear strategy for the business and execute the complex decisions needed to reshape it, including replacing key management positions.

This is what private equity firms exist to do. The founder transition is driving an enormous opportunity for private equity in Australia, particularly in the lower-mid-market where the lion’s share of these businesses operate with valuations between $10m and $200m (Source: ABS, Fortitude Investment Partners). Private equity firms are uniquely positioned to partner with these businesses and inject new capital, fresh vision and professional management, often with the founder retaining a meaningful stake and benefiting from the increase in value.

What does this look like?

In the WAM Alternative Assets (ASX: WMA) portfolio, we hold several private equity businesses that are live examples of this founder transition dynamic, with TEN Group (The Energy Network) being a standout performer. In 2023, WMA co-invested alongside our investment partner Fortitude Investment Partners in TEN Group, a business that was founded in 1998 and had been run as a second-generation family business for twenty-five years. TEN Group supplies pulling and hauling equipment and transmission stringing gear for running conductor between towers, hydraulic tooling for crimping and cutting, fibreglass live-line sticks, earthing sets, jumpers and switches, test and measurement equipment, safety and PPE and asset life extension products across Australia, New Zealand and the Pacific Islands. These are the consumables and capital tools a crew needs to physically build, energise and maintain a powerline.

The opportunity for TEN’s growth is clear: the Australian Energy Market Operator (AEMO) has called for around 6,000km of new transmission to be added to the existing 44,000km network, and for roughly $106bn of investment through to 2050, as coal-fired generation retires and the grid is rebuilt around renewables (Source: AEMO, 2026 Integrated System Plan). Meanwhile, the 44,000km already in the ground needs maintaining every year no matter how the new-build programme progresses, which is the more reliable and recurring part of TEN’s demand.

Under their ownership and through the use of fresh capital, Fortitude have invested in the business and human capital with additional management team talent and two highly experienced non-executive directors, broadened the reach of TEN’s products, invested in sales and marketing capability, and facilitated growth in new market sectors. As a result, the investment has delivered a strong return for investors such as WMA, including regular distributions.

We are seeing this dynamic play out in more businesses than just TEN within the private equity sleeve of WMA’s portfolio, including some key examples below:

• BE Campbell - founded in 1969 by Bruce Campbell as a single delivery run out of a truck in Eastwood, BE Campbell is now one of Australia's largest family-owned meat processors, supplying supermarkets, food service, butchers and export markets. The business is supported by a long-term shift of supermarkets seeking further value added capabilities in its supply chain. Consumers are increasingly buying portioned, retail-ready protein, which moves value from the butcher's counter to the processor.
• ASF Audits - founded in 1994 - is Australia's largest independent specialist auditor of self-managed super funds. Every SMSF must be audited annually by an auditor independent of whoever prepares its accounts, so the number of audits needing to be completed continues to grow with a sector that recently surpassed $1 trillion (Source: ATO March 2026 Quarterly Report). The market remains fragmented and ASF Audits’ approach to quality whilst embracing technology and automation positions the business well to consolidate smaller players.

How we manage the risks

There are significant risks in private equity investments and the tailwind that we’ve seen in prior years of falling rates (cheaper debt) is gone. That raises the bar on manager selection; the return increasingly depends on whether a manager can drive operational improvement and earnings growth, not on the market prices increasing or leverage doing the work for them.

Liquidity, or the lack thereof, is also a key risk. Globally, private equity has been sitting on a large backlog of unsold companies, and distributions back to investors have been historically low for several years running. The Australian mid-market has fared better than the global headlines, as exits here rely less on IPO windows and more on trade sales and secondary buyouts, which have stayed open, but investors need to be willing to lock up their capital for a significant amount of time.

As a manager of a diversified portfolio of alternative assets, the valuation question is the one we get most often: unlisted assets are marked by the manager, not priced by a market, so how do you know the number is real? Independent valuations, strong controls and conservative assumptions are all key factors we look for, but the real test is what valuations these assets end up selling for. 24 underlying assets in our portfolio have been sold since the inception of WMA, and these sales have been achieved at a weighted average premium of 28.3% to the valuation we held prior to sale. We see this as evidence, at least in our own portfolio, that alternative asset valuations have tended to be conservative rather than generous. We look for the same evidence in any manager that we back.

We manage the risks in these deals - key person dependency, customer concentration, earnings that need normalising, a management build-out that stalls – by partnering with the right managers and by investing across a spread of vintages (when the business is acquired), managers and sectors. While a single co-investment in a founder-led business can be a concentrated bet on one team's execution, investing in a range of these deals across several managers can provide investors with diversified exposure to a clear demographic shift and an alternative source of returns.

Many Australian business owners have spent the better part of their lives building high-quality businesses that solve real, structural needs, and few have a clear plan for what comes next. Through managers like Fortitude and Allegro, WMA is backing these businesses – including TEN, BE Campbell and ASF Audits – as they move into their next stage of growth.

For more information visit: WAM Alternative Assets and Wilson Asset Management Real Assets Fund