Regulators looming large

Australia's Foreign Investment Review Board (FIRB) regime has long been, and continues to be, a focus of investors into Australia. However, the new mandatory and suspensory merger control regime, which commenced on a voluntary basis on 1 July 2025 and comes into force on 1 January 2026, represents a seismic shift in how M&A processes will play out in Australia.

Dealmakers should be aware that the new merger control regime will be more rigid, more burdensome, often more protracted and capture many more transactions than the current voluntary merger regime, although it is not expected to result in significant additional intervention by the regulator.

FIRB

In parallel with these merger control changes, there have also been some developments within the FIRB regime itself. In 2024, the Treasurer announced a streamlining and strengthening of the foreign investment regime. In 2025, we have seen faster approval times for small transactions by repeat investors, but longer and more detailed approval processes for sensitive transactions or complex transaction structures (with particular focus on tax and national security issues).

While the vast majority of transactions receive FIRB approval, acquisitions of significant assets in sensitive sectors (such as energy) will continue to be subject to political and security considerations - as was the case in the recent bid for Santos by the XRG-led consortium, where the market priced in a significant risk of FIRB approval not being obtained, despite the bidder consortium having other Australian investments.

The Treasurer also announced an increased focus on monitoring compliance and for the first time has commenced court proceedings in relation to a breach of the FIRB regime by foreign investors for a failure to comply with disposal orders issued by the Treasurer. In addition, the ATO has increasingly been using the FIRB process to commence audits or investigations into foreign investment structures, and we expect this scrutiny to continue in 2026.

With FIRB fees now being allocated to fund government policy, the complexity and breadth of the regime is not expected to change in the short term. However, it remains to be seen whether the Treasurer's focus on reducing red tape will lead to more sensible exemptions. In this respect, the implementation of a 75% refund for unsuccessful bidders (or a full credit of the application fee to be applied to another FIRB application made in the following 24 months) in competitive processes is welcome news.

ACCC

Turning to the new merger control regime, dealmakers will need to navigate significantly different notification requirements compared to the current voluntary regime, which requires a preliminary competition assessment to be performed. To summarise, a broad range of share/unit and asset acquisitions (including of land and leases) that are expected to complete after 1 January 2026 and that satisfy (low) monetary and jurisdictional thresholds, based on the parties' Australian revenue and deal value, will need to be notified to the Australian Competition and Consumer Commission (ACCC) and must not be put into effect until 14 days after ACCC clearance has been received.

Failure to notify an acquisition pending clearance may result in significant penalties for corporations or individuals and will result in the transaction being void. At present, subject to some exposure draft legislation recently released for consultation, only acquisitions of 'control' in relation to shares/units are required to be notified, but there are few other narrow and technical exceptions.

For the first time, dealmakers will need to pay fees to the ACCC - A$56,800 for Phase 1 reviews, between A$475,000 to A$1,595,000 for Phase 2 reviews (tiered by transaction value), and A$401,000 for public benefits applications. A notification waiver application for very simple transactions will cost A$8,300. There are a number of important issues which require careful consideration:

1. Complexity of application heightens risks: The new notification thresholds introduce significant complexity, requiring careful assessment of corporate group structures, precise attribution of Australian revenues to entities and assets, and records of historical acquisitions on a three-year 'lookback' designed to capture more transactions by private equity and other serial acquirers. The penalties for, and practical consequences of, getting it wrong are significant.
   
2. International reach: The new regime has a broad geographic reach. Its very thin jurisdictional nexus can, in particular circumstances, be satisfied where the target has for example customers, users or suppliers in Australia. Particularly having regard to a low A$250 million global transaction value secondary threshold, the new regime will capture many offshore deals where the target has minimal activities, and perhaps no physical presence, in Australia.
   
3. Transparency: Whereas under the old regime over 90% of notifications were cleared on a confidential basis, under the new regime, the ACCC must place all filings (including waivers) on its website within a day of notification (with a very limited carve-out for hostile takeovers). As well as demanding earlier announcement of transactions, this also provides much greater opportunities for competitors, customers, unions, lobby groups and other interested stakeholders to engage with the ACCC to seek to disrupt transactions.
   
4. Document hygiene: In complex transactions, both parties must produce two years of documents 'prepared by or for or received by the board or a board committee' that relate to the transaction or assess the competitive conditions or business plans regarding the relevant goods or services. Those documents are often highly probative and impactful in ACCC mergers reviews, and can be used or referred to in subsequent investigations by the ACCC. Mitigation measures should be considered to avoid producing irrelevant but sensitive documents to the ACCC, protect legal privilege, and manage risks of poorly considered or loosely expressed documents adversely impacting ACCC reviews.
   
5. Risk shifting: The new regime tends to shift more regulatory risk onto sellers. This arises both because of the need for more deals to be conditional upon ACCC clearance, and because the ACCC is no longer able to review multiple shortlisted bidders or provide confidential clearances. As a result, sellers will need to proceed to signing conditional documents and announcing the deal with no or limited substantive engagement with the ACCC. Sellers are increasingly likely to look to risk allocation mechanisms such as reverse break fees, non-refundable deposits, pre-commitments to specific divestitures and 'hell or high water' provisions.

On the buy-side, we anticipate that bidders will be seeking increased access to information from sellers (including financial and market information and board materials), which will require enhanced competition law protocols. For both sides, robust and reliable advice on substantive competition issues affecting execution risk, reviewing time and remedies is more important than ever.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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