One in 50 year changes to M&A law in Australia

The reforms mark one of the most substantial overhauls of the country's merger control regime in over 50 years, and have been called for by the Australian Competition and Consumer Commission (ACCC) for some time. They will take effect on January 1 2026. 

Justin Smith, Managing Director at Ansarada said of the new law: “The changes are designed to strengthen Australia's merger control regime and protect consumers from anti-competitive mergers.

“Companies will need to be prepared for the increased regulatory oversight and to allocate time and resources to comply with the mandatory notification and suspensory rule.”

Pete Burgess, Corporate Finance Partner at Grant Thornton Australia added: “We focus on a range of different data points for our clients when assessing a potential merger, such as value and ability to transact. These changes are expected to increase the time and associated costs of any transaction that falls within these thresholds and as a result we need to be cognisant of the impact that these increases may have on net proceeds.

“Further, buyers that can demonstrate their ability to move smoothly and quickly through the regime will be able to bolster their position in competitive and bilateral processes. Having said that, we have seen a significant uptick in the deal activity in the back half of calendar year 24, with many of our clients noting that the additional incentive of closing transactions ahead of any new changes.”

Key changes to Australian M&A law

So what will change for businesses? We’ve broken down the significant changes below:

Mandatory notification

Probably the most significant change is mandatory notification, as opposed to the current voluntary notification system. Parties to a merger will be required to notify the ACCC before proceeding, even if the ACCC has not requested a notification.

Chris Kok, Partner at King & Wood Mallesons noted: “While the introduction of statutory timeframes will bring greater certainty and transparency for businesses, the ACCC’s ability to ‘stop the clock’ may mean that for some complex deals, timing certainty remains a challenge. 

“To mitigate these risks, businesses will need to focus on providing the ACCC upfront with detailed applications supported by data, information and documents.”

Suspensory rule

A suspensory rule will prohibit parties from "putting into effect" a notifiable merger until they receive clearance from the ACCC. At the moment, there is no suspensory rule, allowing parties to proceed with a merger while the ACCC reviews it. This means that parties will be unable to complete a merger until the ACCC has reviewed and approved it. 

Luke Woodward, Partner and Head of Competition Law at King & Wood Mallesons added: “Businesses negotiating deals today and throughout next year will need to be factoring in the new merger laws in any transactions that will close post-2025 to avoid delays and execution risks.”

Single administrative regime

A single, mandatory administrative merger regime will replace the existing system, eliminating the informal clearance process. This will streamline the merger review process but also lead to increased scrutiny for certain transactions.

Increased penalties

Higher penalties will be introduced for non-compliance with merger laws, including civil penalties for failing to notify the ACCC or completing a merger without clearance. 

In a statement following the introduction of the bill to parliament, ACCC Chair Gina Cass-Gottlieb said: “The ACCC is committed to the successful implementation of these reforms, if passed by parliament, to ensure that transactions that may adversely affect competition are subject to adequate scrutiny based on the risks raised, and to provide a more efficient and transparent process for businesses and for the wider community.”

“Part of making these reforms a success will be ensuring businesses have clarity on their obligations, the timeframes they can expect, and other key aspects of the process.” 

Merger review thresholds 

In the first instance, the ACCC would review any merger where the combined Australian annual turnover of the businesses is above $200 million, and either the target business or its assets have Australian turnover above $50 million, or global transaction values over $250 million. 

Secondly, the ACCC would step in if a major business with annual turnover exceeding $500 million plans to acquire a smaller business with Australian turnover or assets exceeding $10 million. This small value is significant as it will dramatically increase the volume of deals the ACCC will review, further delaying the deal making process.

Implications for businesses and the economy

The changes to Australia's M&A laws are a mixed bag. “On the one hand, they are intended to promote fair competition and protect consumers. On the other hand, they could have unintended consequences, discouraging investment and economic growth in Australia,” said Justin.

“One of the key concerns we have is that the new laws could lead to increased transaction costs because businesses will need to spend more time and money on due diligence, regulatory compliance, and potential legal challenges. As a result, it’ll likely become more difficult for businesses to justify certain M&A transactions.

“Another key concern is the new laws have the potential to discourage foreign investment in Australia as foreign investors may be more cautious about investing in a country with a complex and uncertain regulatory environment.”

Andrew McFarlane, M&A Partner at BDO Australia added: “Given the far-reaching nature of the changes, many areas of the Australian M&A landscape will be impacted. Anyone involved in transactions will need to be across the detail and its implications.”

What’s next for Australian M&A

The new M&A laws represent a significant departure from the current regulatory framework in Australia. While the new laws will not come into effect for some time, it’s important to start familiarizing yourself with the changes. 

Luke noted: “While the passing of the bill provides much needed certainty on the future landscape of merger control, many important details are yet to be locked down – with approximately 27 legislative instruments expected to be implemented over the next year addressing key matters such as filing threshold.”

While they aim to promote fair competition and protect consumers, they will also have implications for businesses of all sizes. Understanding these changes is essential for businesses operating in the Australian market to ensure compliance and minimize potential risks.