Drop in Zombie companies on the ASX in 2025

30 October 2025

New data from KPMG Australia shows there has been a 41 percent decline in ‘zombie companies’ on the ASX in the last 6 months. However, some sectors continue to feel distress with healthcare and manufacturing seeing a rise in zombies in 2025.

Companies are considered ‘zombies’ when they exhibit indicators of financial distress for an extended period of time* but are not yet insolvent and continue to trade.

The number of zombies on the ASX has been trending down since its peak of 180 in September 2024, to 153 in March 2025 to now 90 in September 2025**.

The average size of zombie companies is also falling as the market cap of all ASX zombies dropped $1.08 billion from March to September and now sits at $525 million.

Lower interest rates, rising consumer sentiment and high commodity prices have been acting as an antidote to the scourge of zombies that had been infecting the ASX. Global stock markets keep hitting new highs, as trade tensions ease, combined with significant business investment in AI and its infrastructure, such as data centres, fuelling market confidence worldwide.

KPMG Head of Turnaround & Restructuring Gayle Dickerson said, “growth in stock market valuations, lower interest rates and increased consumer sentiment are giving businesses the extra breathing room to keep themselves solvent. However, this improvement remains delicate with ongoing geopolitical risk remaining a threat to global markets and interest rates may hold or even potentially rise in the next 12 months as inflation remains sticky.”

Three sectors make up 57 percent of zombies in Sept 2025. Raw Materials and Natural Resources sector made up 36 percent of zombies and were the majority of the drop in distressed companies across the ASX. There were 11 Technology and Telecommunication zombies (12 percent) and 5 Energy sector zombies (9 percent).

“The resources sector is typically volatile given it rises and falls with commodity prices. The investor interest in rare earths as well as increases in gold and iron ore prices have has helped see capital flow into the sector eliminating many distressed companies.”

Of the 90 zombie companies, their headquartered mainly in 3 states - WA (35), NSW (20) and VIC (19).

Which sectors remain contagious?

Despite the reduction in zombie companies across the ASX some sectors have struggled to build up immunity.

Over the last 5 years zombies having been trending up in the healthcare sector from 2 zombies in Dec 2020 to 7 zombies in Sept 2025.

“Healthcare sector is facing soaring costs and labour shortages along with an increased prevalence of short stay and same-day admissions. It’s caused them to seek increased Private Health Insurance (PHI) contributions well beyond what the insurers are willing to contribute leading to significant distress across the sector,” explains Gayle Dickerson.

It is a similar story for Manufacturing which had 1 zombie in Dec 2020 and now has 3 in Sept 2025.

Australia faring better than rest of the world – for now

Despite increases across some sectors, Australia has stayed relatively immune to the scourge of zombies infecting other major economies.

Globally the number of zombies increased by 8.1 percent to 1,435. The Raw Materials and Natural Resources sectors, as well as the Technology and Telecommunication sectors, contributed the highest share of zombies with around 19.2 and 12.4 percent respectively, followed by the Biotechnology sector with around 11.5 percent.

“Australia should not rest on its laurels as we could see the levels of zombies return with an increase in interest rates or disruption in stock markets. Business confidence has improved, and there will be productivity changes driven by AI and technology. However, this is no doubt a period of significant disruption,” said Gayle Dickerson.

More options for distressed businesses

Boards have new tools at their disposal to help them work through a solvency or liquidity crisis, with the introduction of safe harbour legislation, and the rise of private credit who typically can take a higher level of credit risk. KPMG’s own research suggests that listed companies that entered Administration or Liquidation in 2023 and 2024, directors in 75% of cases had utilised safe harbour protection.

The private credit landscape is rapidly evolving and now over $200 billion in size in Australia and around an 11% share of Australia’s banking corporate loan pool.

“Private credit and safe harbour legislation have given directors more pathways to a successful turnaround. However, recognising distress early and bringing in experts to support a turnaround is key to ensuring companies don’t join the horde of zombies that remain on the ASX,” said Gayle Dickerson.

^{*Through its Financial Performance Index (FPI), which analyses a combination of publicly available market and financial data, KPMG defines a zombie company as having an index score of zero for three or more consecutive quarters.}  

^{**Updated financial data previously unavailable has meant an upward revision to the number of zombie companies in 2024.}  

Notes

Analysis is based on KPMG Global FPI data and methodology, core data source is S&P Capital IQ.

Analysis includes Australian headquartered companies, including companies which may not be ASX listed.

The S&P database extracted approximately 2,133 companies for 3Q25. Of these, 1,386 met the final FPI inclusion criteria. While this is close to the ~2,050 entities listed on the ASX website, it is important to note that the ASX count includes wholesale and retail debt issuers, which are excluded from FPI analysis.