To merge or not to merge? Proposed reforms to merger clearance

A change to Australia’s merger laws is on the horizon. The Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (the Bill) passed both houses of the Australian Federal Parliament on 28 November 2024.

The Bill introduces important reforms to Australia’s merger laws with a view to enhancing, ‘efficiency, predictability and transparency for businesses, stakeholders and the community’.[1] The effect of the changes from 1 January 2026 will, if they come into effect, provide a single mandatory administrative system for acquisitions in Australia. The Australian Competition and Consumer Commission (ACCC) will be the decision maker in the first instance.

What will the changes mean if passed?

The Bill will amend the Competition and Consumer Act 2010 (Cth) by replacing the current voluntary merger process with a mandatory notification regime for certain acquisitions of shares or assets. The ACCC will be able to determine which acquisitions can proceed, grant ‘immunities’ and ‘stop the clock’ at certain points in the process.[2]

If the Bill is passed as law, the new regime will become mandatory from 1 January 2026, but parties can voluntarily notify proposed acquisitions to the ACCC from 1 July 2025.

In this article, we recap some of the key elements of the Bill and suggest ways that dealmakers can approach the changes.

How will the proposed regime impact you?

1. Relevant acquisitions

The proposed regime will apply to acquisitions that are ‘notifiable’.

Acquisitions that will not be relevant to the Bill are those that are not ‘notifiable’ and those that are or are part of, an internal restructure or reorganisation within a corporate group (including by means of a trust or partnership).

2. Notifiable acquisitions

Businesses contemplating a merger will have a legal obligation to notify the ACCC if the acquisition meets certain criteria.

‘Notifiable’ acquisitions include the following:

• those that meet a specified threshold determined by the Minister (which will be specified in regulations following the Bill)

• those that are within a determined class of acquisitions determined by the Minister (also to be specified in the regulations)

• shares in the capital of a body corporate by a person that results in the person gaining control over the target’s business and is within a class of determined acquisitions

• surprise hostile takeover bids involving an acquisition of shares in the capital of a body corporate (with certain modifications)

• shares in the capital of a body corporate and/or a person’s assets by a corporation

• a corporation’s assets

• any other acquisition relating to a corporation determined by the Minister

• by a partnership, units in a unit trust or interests in a managed investment scheme (MIS), or any other acquisition in relation to a unit trust or a MIS determined by the Minister.

3. Notification thresholds

For now, the federal government has decided that there will be three monetary notification thresholds.

Acquisitions that meet at least one of the thresholds set out in the table below and where the target has a ‘material’ connection to Australia (i.e by carrying on or having plans to carry on business in Australia) are notifiable:[3]

Threshold	Criteria	Example
1. Economy-wide monetary threshold	Combined Australian turnover of merger parties (including acquirer group) is at least $200 million and: Australian turnover is at least $50 million for each of at least two of the merger parties; or the global transaction value is at least $250 million.	ANZ Group’s acquisition of Suncorp Bank this year
2. 'Very large acquirer'	Acquirer group Australian turnover is at least $500 million; and Australian turnover is at least $10 million for each of at least two of the merger parties.	Woolworth's proposed acquisition of SUPA IGA Karabar last year
3. Serial acquisitions	For medium to large sized mergers:  combined Australian turnover of merger parties (including acquirer group) is at least $200 million; and cumulative Australian turnover from acquisitions in the same or substitutable goods or services over a 3 year period is at least $50 million.  For very large acquirers: acquirer group Australian turnover is at least $500 million; and cumulative Australian turnover from acquisitions in the same or substitutable goods or services over a 3 year period is at least $10 million.	Petstock's large number of small acquisitions in the pet industry

 

The Bill also proposes:

• a notification waiver process where parties can apply to the ACCC for a determination that an acquisition is not required to be notified. Valid applications must comply with requirements set out by the Minister (to be specified in the regulations)

• a Ministerial power to set additional notification thresholds in response to evidence from the ACCC about ‘high-risk’ mergers, such as those in the supermarket sector.

4. Statutory time limits

The ACCC will assess notified acquisitions in a two-phase decision-making process with statutory time limits. 

• (Phase 1): Notified acquisitions will be determined within 30 business days from the notification date, subject to any extensions, against an extended substantial lessening of competition (SLC) test. The ACCC will consider ‘whether the acquisition, if put into effect, would or could, in all the circumstances, have the effect, or be likely to have the effect of SLC in any market. [4]

The ACCC expects that around 80% of deals will be determined in 15 to 20 business days during Phase 1 or the notification waiver process.[5]  At the end of Phase 1, acquisitions that do not raise competition concerns will be approved (with or without conditions) and those that do will proceed to a Phase 2 review.

• (Phase 2): Phase 2 reviews will span 90 business days from the end of Phase 1, subject to any extensions. At the end of Phase 2, the ACCC must determine that an acquisition may be put into effect (with or without conditions) unless it is satisfied the transaction would have the effect or be likely to have the effect of SLC.

• (Public benefit applications): Parties can also apply to the ACCC on public benefit grounds. The ACCC has 50 working days from the effective application date to make such a determination.

Businesses should be aware that despite the timelines above, the ACCC will have the right to extend the determination period (i.e ‘stop the clock’) in certain circumstances. For example, where the ACCC becomes aware of a change of fact relating to a notification that is material to its determination.

5. Tests

The following changes will be made to the tests to be applied by the ACCC:

1. the SLC test at Phase 1 will be widened to include whether the proposed acquisition ‘creates, strengthens or entrenches a substantial degree of power in the market’ [6]

2. the ACCC will consider a range of new economic factors when assessing the risks to SLC. For example, the level of concentration in the market

3. a new test to facilitate mergers that may benefit the broader community if the ACCC is satisfied that an acquisition would have the effect or would be likely to have the effect of SLC if it would be likely to result in a public benefit that outweighs the public detriment.

6. Procedural safeguards and transparency

The ACCC must ensure procedural fairness and many of its decisions will be subject to an obligation to provide reasons. Parties can seek a limited merits review of the ACCC’s determinations on application to the Australian Competition Tribunal (Tribunal). Further, the ACCC will be required to keep a public register of notified acquisitions. The aim of the register is to provide transparency of the ACCC’s findings. However, the proposed changes will allow certain transactions involving surprise hostile takeovers to be reviewed confidentially before information is published on the register.

7. Other elements 

Other important elements of the Bill include:

1. application fees of around $50,000-$100,000 for most transactions will apply, with an exemption available for small businesses. Information on the fees will be set out in the regulations

2. pecuniary penalties for contravening the notifiable acquisition provisions and the prohibition on putting ‘stayed’ acquisitions into effect. Acquisitions will be ‘stayed’ in certain circumstances, including:

   • if the acquisition is required to be notified but has not been

   • if the acquisition has been notified, but has not been fully considered

3. civil penalties will apply for knowingly providing false or misleading information to the ACCC or the Tribunal ($50 million for body corporates, $2.5 million for persons), alongside existing criminal penalties. Directors can be disqualified for contravening this obligation

4. acquisitions that are put into effect or purportedly put into effect when they must not be, will be rendered void.

What you need to do

The proposed changes will significantly impact you if you are a business contemplating a merger or a participant affected by a merger (i.e a supplier, customer or employee). [7]  The true effect of the planned changes will remain uncertain until the regime is implemented in practice – but, the compliance costs are expected to be high.  

You should prepare for the proposed regime by taking the following steps:

1. determine if the changes are likely to affect any of your current or future deals by seeking advice on whether the transaction(s) will be notifiable or if you can seek a notification waiver

2. for acquisitions that are notifiable:

   1. be prepared to pay the application fee (bearing in mind you may incur incidental costs depending on the length of the ACCC’s review process) and review your deal timeline

   2. directors – understand your compliance obligations.

 Authors: Rebecca Hegarty and Isabella Costa