M&A Reforms in Australia
Regulation of competition in the marketplace is a balance between permitting free enterprise to invest its money where it sees fit whilst maintaining competitive forces that increase efficiency for all players.
In late 2024 the Australian Parliament passed a law that brings new regulatory over sight of merger and acquisitions. The reforms aim to support the healthy competition of Australia’s markets, by including mandatory notification requirements to the ACCC and increased transparency in the marketplace about potential mergers. However, businesses are rightly wary of the cost and time impact the additional regulation may have.
The new merger regime will begin on 1 January 2026, but parties to a merger may also start voluntarily using the new system from 1 July 2025.
Which mergers and acquisitions will be affected?
Notification thresholds require notification where a deal meets one of the below limbs:
· Limb 1 ‘Large Mergers’
o combined Australian turnover of $200m; and
o combined turnover of at least $50m of two merger parties or global transaction value is at least $250m.
· Limb 2 ‘Very large acquirers’
o acquirer group Australian turnover is at least $500m and the Australian turnover is at least $10m for at least two of the merger parties; and
o there are also additional cumulative thresholds that look at activity over the past 3 years.
Additional cumulative thresholds apply that take into account the previous 3 years of activity.
As will be apparent from the above, for small businesses the main risk here is that they will be affected where they are selling / merging a business to a large acquirer.
What are the goals of these reforms?
The government wants the ACCC to consider the competitive impact of a wider range of mergers and for the public to have greater opportunity to comment on the proposed mergers.
Hopefully, the reforms do strengthen competition in the market which benefits all Australians. The reforms will come with a cost however and the additional burden of regulatory oversight may end up increasing overheads, leading to higher prices for consumers.
The ACCC itself will have the unenviable task of balancing these concerns in its goal of maintaining a healthy level of competition in the market.
A new test to measure effect on competition
In considering the effect of the merger on the competitiveness of the market, the ACCC will use an expanded ‘substantial lessening of competition test’ (‘SLC test’). The SLC test measures whether a merger or acquisition will create or strengthen a substantial degree of power in the Australian market.
Greater transparency
The ACCC will establish a public register that lists all the notified acquisitions (with limited exclusions). This public register will give opportunities for all stakeholders to make comments on the mergers before the ACCC.
Shorter timeframes
As part of the more structured regime, there will be a definite timeline applied to merger approvals. The existing regime has no timeline.
The new regime introduces a two-phased approached to approvals:
· Phase 1 provides for an initial review period of 30 business days, giving the ACCC time to consider the merger on its face. Simpler transactions may be completed under a ‘fast-track’ system in as short as 15 days.
· For complex transactions, phase 2 gives the ACCC a further 90 business days to consider the merger. This means total timing will be 120 business days for a merger to be approved. Significant costs will be accrued in that period prior to parties knowing the outcome.
If the ACCC does not make a determination within the timeframe, subject to any extensions, the merger will be deemed to be approved.
What can businesses do to prepare?
The great changes to the regime may cause concern for parties contemplating a merger.
The impending implementation may encourage more parties to complete mergers in this calendar year.
Once in place, parties should consider updated template terms sheets and related documentation to account for the new regime. Competition advice should be sought early in the process.
Additional resources
If you are interested in learning more about merger reform in Australia, the below articles provide helpful insight:
Merger reform for a more competitive economy: Government response to consultation: https://treasury.gov.au/publication/p2024-589891
Reforming mergers and acquisitions – notification thresholds: https://treasury.gov.au/consultation/c2024-562395
This article was written by Pippin Barry (BA, JD Unimelb 2012), Australian lawyer, and Tom Xie (BComm 2022 Unimelb), paralegal.
