Businesses need to brace themselves for the most extensive overhaul of merger clearance regulations in decades.
The proposed reforms, expected to take effect from January 2026, aim to create a “stronger, simpler, faster, more targeted, and more transparent” merger regime in Australia, according to Dr. Chalmers. Gina Cass-Gottlieb from the ACCC expressed support for the reforms, highlighting the potential for the ACCC to better assess mergers without hindrance.
The proposed merger reforms mark a significant departure from the existing approval process and will impact the resources, timeframes, and expenses associated with completing deals in Australia. Here are some of the key implications and uncertainties:
- Mandatory Notification Regime: Implementing ‘low’ thresholds for notification would capture transactions that would otherwise not be reported. This includes:
- International deals with minimal connections to Australia.
- Domestic transactions not requiring Foreign Investment Review Board (FIRB) review/approval.
- Deals falling below the ACCC’s voluntary threshold or those parties might opt not to report, including mid-market transactions.
- Thresholds Based on Market Concentration Metrics: Introducing thresholds based on market concentration metrics introduces significant uncertainty for deals not meeting monetary thresholds.
- Fast Track Notification Process: For uncontroversial deals surpassing the thresholds, the form and requirements of any expedited notification process will be crucial.
- Confidential Clearance: The inability to seek clearance confidentially will impact deal processes, particularly in competitive bid scenarios.
- Increased Information Requirements: For deals necessitating notification, there will be a greater volume of upfront information/material to provide to the ACCC, potentially leading to higher costs, longer timelines, and increased effort for parties. Additionally, a fee will be levied.
- Prohibition on Closing: The regime would formally prohibit parties from finalizing deals until obtaining clearance from the ACCC, aligning with the current FIRB stance.
- Timelines and Certainty: While timelines will offer enhanced certainty for parties, the inclusion of clock stoppers or agreed extensions might prolong timelines, reintroducing uncertainty.
Under the new rules, merging companies will have to get approval before completing a deal, starting in 2026. This means businesses need to think about how their deals might affect competition before going through with them.
The government will ask for feedback on the new rules over the next couple of years to make sure they work well for everyone involved.
Beste Onay, UNSW Founders Investments and Portfolios Manager said: “While the proposed reforms offer a possible solution, the reality is that they need to better consider the implications for startup founders and the growth of technological innovation in Australia. Being a founder is an incredibly difficult job, and not many will be able to hold onto a business to a point where it can compete with big corporates.
The assumption is that by blocking the merger, the startup will continue to exist in the market, however, there’s a bigger likelihood that this will not be the outcome. Mergers and acquisitions have the potential to open up new opportunities for founders, and usually, when a founder goes through an acquisition they’re in the process of moving on. If we take away these opportunities we risk stifling innovation locally, and discouraging new businesses which means less competition ultimately.
While the reforms are a good possible step forward, we need to consider all sides of the puzzle.“
Chalmers criticizes the current merger laws as inadequate, noting that the ACCC lacks the necessary tools to identify and act against anti-competitive mergers. Despite an average of only 330 mergers scrutinized annually, over 1,400 mergers were recorded last year, raising concerns about the ACCC’s ability to prioritize effectively.
ACCC Chair Gina Cass-Gottlieb welcomes the government’s move to strengthen merger laws, emphasizing the importance of maintaining competition to prevent higher prices, reduced choice, and diminished innovation. These reforms, set to be unveiled by the Honourable Dr. Jim Chalmers at the 10th annual Bannerman Competition Lecture in Sydney, follow submissions by the ACCC advocating for a more effective merger regime to detect and prevent anti-competitive transactions.
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