Mergers and acquisitions reforms

The Australian Parliament has now passed the Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024. Further to our previous legal insight article, this introduces a mandatory notification administrative model for merger reviews in place of the current voluntary and primarily informal and judicially enforced regime.

The M&A reforms will take full effect on 1 January 2026 with transitional arrangements beginning on 1 July 2025.

Generally

The new regime, which is contained within the Competition and Consumer Act (Act) and in regulations made under it, is very prescriptive and process orientated. Parties will need to be mindful of deadlines and following the correct procedures in order to avoid delays to transactions and contraventions of the Act. A key feature of the regime is that notifiable transactions are 'stayed' (cannot proceed) unless the ACCC has determined that the transaction may be put into effect.

New review process

1. Mergers which fall within the transaction thresholds (to be set by regulation) must be notified to the ACCC.
2. The ACCC will conduct an initial assessment of whether a transaction could substantially lessen competition in a market (Phase 1 review) - parties are advised of the ACCC's decision 15 to 30 business days after the notification date.
3. If the ACCC determines the transaction does pose sufficient competition risk, it will provide a notice of competition concerns and a conduct further assessment to determine whether approval should be granted (Phase 2 review) - up to 90 business days after the end of Phase 1.
4. If the ACCC does not grant approval due to competition risk, the acquirer can seek to have the transaction approved by the ACCC on a net "public benefits" basis.
5. If the ACCC does not grant approval, there are limited rights of review by the Australian Competition Tribunal.

It is noted that the specified timeframes in relation to obtaining ACCC approval will be extended where relevant information has not been provided by the applicant.

Likely notification thresholds

The relevant transaction thresholds are still to be confirmed by regulation, however Treasury has indicated there will three types of notification thresholds:

• If the Australian turnover of the combined businesses is above A$200 million and either:
  • the business being acquired has an Australian turnover above A$50 million; or
  • the global transaction value is above A$250 million.
• Acquisitions involving a business with Australian turnover more than A$500 million buying a smaller business or assets with Australian turnover above A$10 million.
• Acquisitions by businesses with a combined Australian turnover of more than A$200 million where the cumulative Australian turnover from acquisitions in the same or similar goods or services over a three-year period is at least:
  • A$50 million; or
  • A$10 million if a very large business is involved.

Sector specific thresholds are likely to be introduced in some cases, such as for acquisitions involving supermarkets.

Impact

These reforms have been described as the most significant change to Australia's merger regime in 50 years. These changes will no doubt effect deal makers and businesses with acquisition-based growth strategies.

We expect the M&A reforms to have the following impacts:

• Parties will need to consider the merger approval process as part of early planning for a transaction and develop a detailed plan to manage the process.
• While the new review process provides some certainty around the timing of reviews and decision making, it is likely that many transactions will be delayed.
• There will be additional cost to the parties, including additional legal costs and a not insignificant application fee (Treasury has indicated this may be between $50,000 and $100,000).
• Acquisitions of relatively small targets by large market players are likely to be under greater risk, as are serial acquisitions.

This preliminary update will be followed by a more substantive one shortly, which will be published on our website.

Should you have any questions, please feel free to contact Robert Neely.

PLEASE NOTE THIS UPDATE HAS BEEN PROVIDED FOR INFORMATIVE PURPOSES ONLY AND IS NOT LEGAL ADVICE.