Homeowners are not the only group affected by the RBA’s decision, Australia’s M&A market is feeling the impact too, though in more subtle ways than the headlines suggest. A single rate rise doesn’t halt dealmaking, but higher interest costs do raise the cost of capital (minimum return a company must earn before generating value), particularly for highly leveraged transactions. This can slow private equity-led deals, tighten financing conditions and put modest downward pressure on valuations. Strategic buyers and well-capitalised corporates, however, often remain active because they are less reliant on cheap debt.
In practice, rate hikes tend to reshape how deals get done rather than stop them, with more conservative leverage, tighter financing terms and a sharper focus on resilient cash flows.
With rates driving the cost of capital, the RBA decision will quietly influence which Australian deals get done - and on what terms.
