Australian M&A enters a new merger review era in 2025
Australian M&A enters a new merger review era in 2025
On 28 November 2024, the Treasury Laws Amendment (Mergers and Acquisitions Reform) Act 2024 was passed by Parliament.
This represents the most substantial changes to merger laws in more than 50 years, moving from a voluntary, informal review process to a mandatory and suspensory notification regime.
Key changes include:
- Mandatory notification thresholds based on transaction values and turnover
- Prohibitions from proceeding with notifiable mergers until clearance from the Australian Competition and Consumer Commission (ACCC) is received
- Significant penalties for non-compliance with mandatory notifications
- A public register of all notifiable Mergers & Acquisitions (M&A)
- Pre-determined timeframes for ACCC reviews
- Enabling the ACCC to review any merger within a ‘high-risk’ industry.
The regime applies to transactions ‘put into effect’ after 1 January 2026. This means agreements entered into during 2025 will be subject to the new laws where completion occurs in 2026. In these cases, transitional arrangements allow parties to ‘opt-in’ to the new regime from 1 July 2025 onwards.
For mid-market businesses, these changes will be especially significant, and careful consideration will be critical to ensure continued growth and market competitiveness for parties who are considering acquisitions and divestments in 2025 and beyond.
Exploring the key changes in the legislation
Under the new regime, any acquisition of shares or assets that meet the thresholds below must be notified to the ACCC and cannot be completed until the ACCC provides clearance.
Failure to comply with these requirements will mean the transaction is void and may result in penalties of up to $50 million, three times the benefit of the illegal conduct, or 30 per cent of the Australian group turnover.
Mandatory merger notification thresholds
The specific thresholds will be set out in subsequent legislation, which has not yet been finalised. However, Treasury has indicated that the monetary notification thresholds will be as follows.
|
Monetary thresholds |
||
|
Economy-wide |
|
|
|
Very large acquirers |
|
|
|
Serial acquirers |
For medium-to-large sized mergers |
For very large acquirers |
|
|
|
Acquisitions with less than $2 million Australian turnover are expected to be excluded from the regime.
Specific notification thresholds are expected to be included for certain industries, markets, classes of assets, or even specific acquirers to ensure:
- The ACCC is notified of every merger in the supermarket sector, and requirements are also being considered for other sectors such as fuel, liquor and oncology-radiology
- The ACCC reviews purchases of an interest above 20 per cent in an unlisted or private company, if one of the companies involved in the deal has a turnover of more than $200 million.
Application to property transactions
The new regime applies to acquisitions of land, including leases and exercises of lease options. However, there is a proposed exemption from notification for land acquisitions. This includes land acquisitions made in relation to residential property development or by businesses that primarily engage in buying, selling or leasing property and do not intend to operate a commercial business (other than leasing) on the land, unless those acquisitions are captured by additional targeted notification requirements.
Three-year test for serial acquirers
The three-year cumulative test set out in the table above means that once an acquirer group meets the cumulative threshold test in a given three-year period, every additional transaction over $2 million that the acquirer makes in the same or substitutable sector will need to be notified to the ACCC during that three-year period.
Further, when the ACCC is considering a proposed transaction, it will have the ability to aggregate the effect of that particular transaction with the effect of all other acquisitions by the acquirer where the target was involved in the supply of the same or substitutable goods or services (disregarding any geographical factors or limitations) in the previous three years.
This will have significant implications for parties in the process of, or proposing to, roll up several smaller targets in an industry as part of an inorganic growth strategy, including private equity funds.
Expanded interpretation for ‘substantial lessening of competition’ test
The ACCC will be able to block an acquisition if it’s satisfied that the acquisition would have the effect or be likely to have the effect of substantially lessening competition in any market.
The new regime also provides that an acquisition may substantially lessen competition in a market if it would, in all the circumstances, create, strengthen or entrench a substantial degree of power in the market, even if the change is not, itself, substantial.
Accordingly, for parties planning to implement smaller transactions that do not trigger the notification thresholds but raise potential competition law concerns, it may be prudent to notify such transactions under the new regime voluntarily.
ACCC review process
The ACCC will be subject to statutory time limits for its review process, which follows a phased approach. For more complex transactions, parties are expected to meet with the ACCC to explain the deal and negotiate information requirements before the timeline officially starts.
Additionally, the ACCC can 'stop the clock' until it receives all the required information, meaning clearances are expected to take longer and cost more than they do now. This statutory deadline is a significant shift from the current flexible timeframes for reviews in the informal regime.
Implications for organisations looking to buy or sell
The new merger regime is expected to have a significant impact on transactions, including:
- Increased scrutiny: More thorough reviews of proposed M&A activity, resulting in longer timelines for deal approvals
- Higher transaction costs: Organisations will need to invest more in legal and compliance resources to navigate the new regulatory landscape, including preparing detailed submissions to the ACCC
- Strategic planning: Strategic planning on transactions will be a priority, considering the new thresholds and the potential for increased regulatory intervention
- Market uncertainty: There may be more uncertainty during the transition period, as organisations and regulators adjust to the new regime
- Voluntary ‘opt-in’: Parties considering transactions in the second half of 2025 will need to closely consider whether it may be prudent to voluntarily notify under the new regime.
How can you prepare for the new reform?
To prepare for the new regime, we suggest leaders should:
- Prepare early for transactions: The new regime's full implementation will not occur until 2026, but businesses should start preparing now. Engage with the ACCC’s consultations and stay updated on the draft guidelines expected in early 2025. Early engagement will help businesses understand the new processes and avoid delays when the regime becomes mandatory
- Stay informed about sector-specific risks: The new laws will allow the Treasurer to designate high-risk sectors and impose specific notification thresholds for those areas. Mid-market businesses should monitor developments in their industry to assess whether they fall under these new thresholds. Early awareness of these changes will help businesses plan their merger strategies accordingly
- Leverage accelerated approval timelines: The reformed merger regime aims to streamline the approval process for non-contentious mergers. Mid-market companies should consider how these faster approval pathways might benefit their M&A strategies, especially when seeking to merge with or acquire complementary businesses. This could result in more timely and predictable outcomes for mid-market transactions
- Understand the importance of transparency: With the ACCC now required to publish reasons for all final merger decisions, mid-market businesses can gain more insight into the regulatory approval processes. This transparency will allow businesses to better understand ACCC’s decision-making criteria and help them refine their approaches to M&A planning
- Conduct comprehensive due diligence: With the introduction of mandatory notification, businesses must be prepared for a thorough review of their acquisitions. Comprehensive due diligence will be crucial in ensuring that proposed transactions do not raise red flags with the ACCC. By understanding the full competitive landscape and potential regulatory concerns, businesses can reduce the risk of delays or rejections.
How can BDO help?
Australia’s new merger regime presents both challenges and opportunities. While increased scrutiny and regulatory complexity may seem overwhelming, businesses that engage proactively with the ACCC, stay informed about the upcoming changes, and prepare their strategies in advance will be better positioned to navigate this new landscape.
By embracing the reforms, mid-market businesses can ensure that they continue to thrive in an increasingly competitive and transparent market.
Get in touch with your local BDO deal advisory expert to learn how your organisation can navigate the new reform and continue to pursue growth opportunities through M&A.