Copolymerising polyethylene terephthalate (PET) and polycaprolactone (PCL) could provide a cost-effective method to recycle PET waste into a compostable plastic. In this work we investigated the relationship between formulation, microstructure, and mechanical properties during catalytic transesterification. It was found that the wt.% PCL was most effective in reducing the average PET block length and determining the copolymer's microstructure at equilibrium. Catalytic transesterification is a random process and can only give a narrow distribution when the average homopolymer block length is less than three, as determined by 1H NMR spectroscopy. A statistical copolymer marks reaction equilibrium where the average PCL block length is greater than one, contradicting the theoretical limit of a single PCL block length. It was proposed that the number of PCL ester groups available for reaction diminishes as transesterification progresses, leading to a favouring of the more abundant PET ester groups to undergo neutral or reverse reactions, resulting in equilibrium. As a result of the imbalance in the availability of PET and PCL ester groups at equilibrium, secondary factors, such as increasing the catalyst amount, were ineffective in further propagating transesterification. Copolymers formed in this study were either amorphous or semi-crystalline. The mechanical properties had minimal correlation with crystallinity and instead was mainly influenced by the ratio between the “hard” (PET) and “soft” (PCL and copolymer) segments in the microstructure and the molecular mass. In this study it was demonstrated that the microstructure of aromatic-aliphatic copolymers, synthesized through catalytic transesterification, can be manipulated to tailor physical properties to meet application requirements.