It will not have escaped those participating in Australia’s M&A ecosystem that the regulatory burden has evolved substantially, particularly over the last 5 to 10 years. The days of a single relatively administrative filing obligation, and possibly a couple of informal chats with industry and market regulators to confirm positions, have for most participants long disappeared. Today, the M&A regulatory framework is significantly more complex and dynamic. For those participating, it now offers less upfront clarity, takes longer and costs more to navigate.
It is not the purpose of this memo to analyse in detail how the M&A regulatory framework in Australia has reached this position. Suffice it to say that we have followed many of the regulatory leads of the active and deeper markets of Continental Europe, the UK and the US. The position also seems to have evolved more rapidly over a period where economies and markets have been jolted by the COVID-19 pandemic (and what it revealed) resulting in our political class sending us to a more cautious posture - more inwardly focussed on macro considerations such as national security, economic sovereignty and resilience.
For the time being in Australia, the regulatory “seesaw” has tipped to the side of more regulatory oversight and intervention. If history is any guide, the negative effects of this tipping will reveal themselves over time and a rebalancing will inevitably occur. However, we do not see this happening quickly - meaning participants will have to deal with the existing paradigm for some time to come.
As KWM continues to engage with regulators on optimal M&A regulatory settings (see, for example, our extensive recent submission to ASIC on the evolving dynamics between public and private markets) the near-term question is: how can dealmakers and their advisers best navigate this evolving complexity with Australia’s M&A regulatory framework? In our experience, the most effective deal teams are adopting two essential stances:
- Regulatory strategy as a core pillar of investment execution: Effective dealmakers are taking a deliberate, holistic view of regulatory strategy—engaging legal and regulatory counsel as part of deal inception, mapping regulatory intersections and relationships, and identifying threshold risks that may shape both a current deal and their broader Australian investment program. This is not just technical compliance; it is about managing, mitigating, and—where possible—controlling regulatory risk. The best-in-class approach integrates regulatory strategy into deal structuring, bid tactics, and even post-acquisition value creation. Part of this will also involve assessing what “fallbacks” or alternatives may exist to the path that is prescribed (or otherwise well-trodden) and how should they be presented to the other side as a way of offering certainty and speed of execution.
- Turning compliance drag into competitive advantage: The regulatory burden is not just being viewed as a hurdle—it can also be a lever. Early, informed planning can allow dealmakers to present a more attractive regulatory risk profile in auction scenarios, or to turn legacy regulatory outcomes into differentiators that resonate with counterparties, their advisers, and ultimately boards and investment committees. In a market where execution risk is a paramount consideration, the ability to demonstrate regulatory “readiness” can be levered to competitive advantage.
Below, we breakdown three of the key regulatory intersections that deal teams regularly encounter in Australian M&A: FIRB, Competition and Tax. Our specialists in each area give their observations about what is happening in those areas and where they see advantage being achieved.
FIRB: Foreign Investment Scrutiny—Certainty, Speed, and Stakeholder Management
The Evolving FIRB Landscape
Navigating Australia’s Foreign Investment regime has become a core element of deal execution, particularly for financial sponsors who are more often than not considered “foreign” by reason of their investor base. FIRB’s remit has expanded in line with rising geopolitical sensitivities and the Government’s focus on protecting critical infrastructure, data, and national security. The practical effect of this is more thorough (and often more protracted) reviews, with a greater emphasis on transparency, level of disclosure on the upstream investor base, and detailed engagement with consult agencies (most notably the ACCC and ATO).
Appreciating the politics, respecting the process and having a clear strategy to proactively manage concerns is critical.
1. Process timelines – The vast majority of FIRB approvals are a process. The critical issue is how to obtain approval in a timely manner (while also managing the sunk-cost risk of material application fees). Although a significant part of the FIRB process is outside the control of the applicant (as it often turns on workloads of individual FIRB case officers, the consult agencies and the Federal Treasurer), there are many matters that go to timing that a buyer can control and manage – such as responding to RFIs promptly and efficiently negotiating any proposed FIRB approval conditions.
We expect the consult agencies to continue to use the foreign investment laws to gain greater access to information and to provide an opportunity to impose conditions under a more flexible legislative regime. Applicants therefore also need to have information to hand as part of the foreign investment process to address such access including, at a minimum, ACCC and ATO requests for information.
In anticipation of the new merger regime, the ACCC is currently issuing RFIs for all FIRB applications (and has a particular interest in private equity, tech and roll ups). Proactively managing concerns of the ACCC in a FIRB application (including horizontal and vertical overlaps) through pre-emptive disclosure can minimise the likelihood of the ACCC issuing RFIs as part of the FIRB process. The ATO also uses a standard list of RFIs as part of the FIRB process. Buyers should prepare responses to the standard list of RFIs (in conjunction with their tax advisers) so that they can be promptly answered.
Although the ATO now issues bespoke tax conditions to reflect the particular tax risk of a transaction, there is increasingly standard language being applied to tax conditions. Data conditions (ubiquitous in any tech deal) are also standard. Considering the tax conditions and data conditions in advance of a decision (and knowing what changes may have been achieved on past transactions and where no-go lines may be) will enable buyers to respond promptly to draft conditions once received.
While buyers cannot control every variable, the most effective deal teams are driving process discipline by:
- priming their investor relations teams (and, in some cases, their investors and LPs) on possible RFIs and additional information requirements that will be needed to efficiently navigate the FIRB process.
- proactively preparing detailed response packages to anticipated RFIs, leveraging past experience to pre-empt new lines of inquiry.
- for development assets, considering the FIRB risk at different stages of the development program and selecting the most appropriate time for entry.
- negotiating conditionality with a view to minimising “unknowns” at signing—seeking, for example, to agree on the scope of conditions or remedies in principle, and to identify “red lines” early.
- engaging in parallel workstreams to address likely consult agency concerns, with legal, competition, and tax advisors working in concert.
2. Sensitive assets and political optics - For applications that involve sensitive assets, it is important for applicants to engage early and proactively with Government and the consult agencies to ensure they are ahead of any media narrative (which can quickly build) and to understand the key sensitivities that will need to be addressed as part of any FIRB process. While buyers should actively seek to identify the key concerns and determine potential strategies to address these concerns, it is best in the first instance to listen to the concerns identified by Government, rather than seeking to predict them. Front-running issues in the media to build narrative and support before engaging with Government tends to be viewed unfavourably. Having a well-considered and comprehensive leak strategy will also be important if the media gets ahead of any formal deal announcement.
Applications involving sensitive sectors (e.g. defence, critical infrastructure, data-rich assets, energy, health, media, critical minerals) are subject to heightened scrutiny and increasing media attention. Deal teams must:
- engage with government stakeholders early and transparently, to shape the narrative before third parties (or the media) intervene.
- develop a robust communications and leak management plan, ensuring alignment among buyer, advisers, and the target.
- listen carefully to regulators’ concerns before proposing solutions—demonstrating respect for the process and building goodwill can pay a regulatory dividend.
3. LP make up, upstream disclosure and syndication – FIRB requires disclosure of foreign government investors by jurisdiction of origin. For financial sponsors, foreign government investors from sensitive jurisdictions comprising 5% or more of the investor base for a transaction may cause concern for both target and FIRB. Opt-out provisions in LPAs (as part of the fund establishment process) and considered design of bid consortia and club vehicles (including who sits on the board or governance forum of those vehicles) can assist with management of this.
Financial sponsors should also be mindful of the increasing number of FIRB requests for information about their investors and whether they are truly “passive”. In the United States CFIUS has the authority to enquire about “… all foreign investors that are involved, directly or indirectly, in a transaction, including limited partners in an investment fund” and “…. any governance rights and other contractual rights that investors collectively or individually may have in an indirect or direct acquirer”. FIRB is now treading a similar path, increasingly requesting information about the governance and contractual rights held by fund investors.
With the ‘Five Eyes’ focus on ultimate beneficial owners, it is also increasingly important for targets to interrogate and understand a financial sponsor’s upstream investor base and any other sources of capital that will fund an acquisition. Within the confines of commercially sensitive information, targets are (and will be) seeking comfort about a financial sponsors’ investor composition and whether there are investors from sensitive jurisdictions (noting the 5% disclosure trigger to FIRB). In some cases, targets may also be looking for contractual protections to address any subsequent introduction of new investors in a bid structure that may impact the FIRB risk of the transaction (increasingly common for financial sponsors bids where post-completion syndication may be contemplated).
FIRB’s focus on upstream ownership and passive investor rights is intensifying, particularly regarding foreign government investors from “sensitive” jurisdictions (often with a 5%+ direct or indirect interest). This is not a static issue: as global investor bases diversify, sponsors must be ready to:
- disclose and explain fund structures—including governance rights, vetoes, and information rights—in a manner that is both responsive and commercially sensitive.
- employ opt-out provisions at fund formation, allowing for flexibility where a particular investor’s presence could trigger heightened scrutiny or conditionality.
- take FIRB risk into account in the design of bid consortia and club vehicles, including with respect to which individuals will sit on the board or other governance forum.
- develop syndication models (including consortia or co-investment platforms) that can “cleanse” problematic investors or manage optics for FIRB and counterparties.
4. Strategic use of consortia – Where the Australian target assets may be in a particularly sensitive sector (e.g. critical infrastructure such as data centres and power assets), smart deal teams are thinking about consortia arrangements to help manage the optics of a proposed purchase. The inclusion of a domestic Australian operating partner or the introduction of one or more recognised Australian superannuation fund investors to give a buyer consortium a distinctly Australian “capital and governance” flavour is something we have seen, and expect to continue to see, to help manage potential foreign investment approval risk.
ACCC: Mandatory Merger Control—A New Era of Competition Scrutiny
The new regime
From 1 January 2026, Australia’s merger control regime will be fundamentally transformed. The new rules introduce mandatory (and suspensory) ACCC clearance requirements for all transactions above specified notification thresholds. Significantly, transactions put into effect after the commencement of the new regime without approval will be treated as void.
The broad scope and low thresholds of the new regime mean it will capture a wide range of transactions, including many that are unlikely to raise substantive competition concerns. Amongst the myriad of “teething” problems that can be expected with any nascent regime, there are several aspects that we can already foresee will pose challenges for deal teams in a transaction setting.
Key features and practical implications
- Broad scope – the new laws can apply to a much broader range of commercial transactions than just typical M&A activity. It includes acquisitions of legal or equitable interests in assets (including land), even where what is being acquired is not an entire business. It also means that more deals (rather than fewer) will have an additional regulatory intersection.
- When to notify – in combination with the broad scope of the regime, the revenue thresholds triggering notification are set relatively low, especially for target entities (as little as A$10 million in some cases). There are also complex rules for calculating revenue when considering the acquisition of assets, and “look back” rules requiring buyers to consider acquisitions of similar businesses over the previous 3 years.
- Consequences of non-compliance – transactions implemented without the necessary ACCC clearance are legally void—a unique and severe sanction. This consequence represents a significant additional risk for all parties which cannot be easily cured ex-post (if at all). On cross border and multi-jurisdictional transactions where the Australian component of a transaction is not significant, this “voiding” risk has the potential of creating a real “tail wagging the dog” paradigm which needs to be addressed early and proactively by deal teams and their advisers.
- Notification requirements – the buyer is responsible for notifying the ACCC of an acquisition using a prescribed form. The prescribed forms are, at this time, cumbersome, and require extensive information to be provided upfront (e.g. market structure, transaction rationale, horizontal and vertical overlaps), as well as (for long form notifications) board/investment committee documents.
- Cost – the new regime brings significant new cost: filing fees range from A$54,600 for a Phase 1 application, to between A$475,000 and A$1,595 million for a Phase 2 review. Buyers will need to budget for these costs and factor them into deal economics and bid tactics.
- Regulator resourcing and timing risk – there is a real prospect of over-capture in the new regime, leading to a much higher volume of transactions being notified to the ACCC than has been forecast. This is likely to strain ACCC’s resources, raising the prospect of process delays—even where statutory timelines apply.
Navigating the new regime
Navigating the new regime will require dealmakers to develop a more sophisticated competition merger clearance strategy than has historically been the norm. For many, this will depart from the traditional approach of considering competition merger filings only in response to an immediate transaction. Instead, repeat acquirers will need to engage in more strategic horizon-scanning, to map out the impact and requirements of the merger clearance regime to their prospective transaction pipeline over (at least) the medium term.
The dealmakers who achieve the best outcomes under the new regime will be those that take advantage of (and, to an extent, embrace) regulatory engagement opportunities; especially pre-notification engagement with the ACCC. Inevitably, the fastest path to clearance for many transactions will be via early engagement and full disclosure, including in relation to potential competition risks (and proposed mitigants).
Essentially, putting strategy into practice under the new regime will mean:
1. Proactive pre-notification engagement: Effective early engagement with the ACCC will be important, especially for complex or high-profile transactions. The ACCC encourages early, confidential discussions regarding potential commitments or undertakings to address competition concerns. This approach will enable parties to identify and address potential issues or ACCC questions before a formal notification is lodged, streamlining the review process and reducing the risk of delays (and, ideally, avoiding the need for any escalation to the much more expensive Phase 2 process).
Buyers should use pre-notification engagement opportunities to:
- Test hypotheses, present potential remedies, and negotiate process timelines.
- Develop a coordinated narrative that aligns legal, commercial, and market positioning.
2. Upfront disclosure: Complying with all information requirements and presenting evidence to address potential ACCC and market concerns in the notification application will be critical to avoid unnecessary delays and minimise the risk of escalation to Phase 2. While it might seem contrary to more combative or ‘minimalist’ regulatory approaches preferred by some, early, full and frank disclosure of information and documentation (including potential mitigants) will often be the quickest way to achieve an acceptable outcome for more complex transactions.
Comprehensive, frank disclosure will not just be a regulatory necessity—it will be a tactical advantage. Presenting complete market data, customer/competitor analysis, and robust documentation is expected to expedite review and mitigate the risks of escalation to a phase 2 review.
3. Front-load evidence gathering: Deal teams should start collating data and documents well in advance of notifying the ACCC. This includes details of past acquisitions, board/investment committee documents canvassing the rationale and analysis of the transaction (including in contemplation of such documents being produced as part of a clearance notification), financial reports, organisational charts for key business units, market share data, and customer information. For regular acquirers, having a pre-prepared dataset that can be relied on as a single ‘source of truth’ for future regulatory filings will be invaluable under the new regime.
4. Deal structuring and conditionality: Given the risk of non-compliance, deal teams (on both sides) must be considering how they wish to accommodate the regime approval risk into their transaction terms. Things like:
- building ACCC clearance into deal conditionality (and ensuring alignment with other regulatory timelines, including FIRB and ATO);
- considering break fees, reverse break fees, and other mechanisms to allocate risk appropriately between buyer and seller;
- understanding what the parties will require or permit in terms of regulatory interactions, undertakings and appeals; and
- where feasible, structuring global deals to allow for partial completion if Australian merger clearance is delayed or denied.
Tax: Proactive Engagement for Smoother Execution
Australian tax authorities—federal (ATO) and state—are now deeply embedded in the M&A process, both at entry (via FIRB and direct engagement) and on exit. The days of engaging tax authorities only in response to direct inquiries are over; smart deal teams (on both sides) are now anticipating and proactively managing tax authority expectations as a core part of their regulatory strategy (on entry and on exit).
The most effective deal teams treat tax engagement as a lifecycle issue, not a point-in-time hurdle. This means factoring exit tax scenarios into initial structuring decisions; documenting deal rationales and structures with a view to future tax authority scrutiny; and coordinating legal, tax, and regulatory teams to ensure consistency, especially in responses to cross-agency inquiries.
Key friction points and approaches
To minimise deal friction, buyers should adopt a proactive strategy for dealing with the Australian tax authorities. This will require allocation of appropriate resources (both time and money).
The engagement strategy should take into account the following:
1. Consider your entry: Foreign buyers will initially engage with the ATO as part of the FIRB approval process. This is because the ATO will, as part of the process, ask the applicant a series of tax-related questions (e.g. how the acquisition will be funded, what are the terms of any related party transactions, will the acquisition involve a group for tax purposes).
There is an inevitable tension between early and late engagement with FIRB – the strategy must seek to strike the right balance of when to approach. Early on, the transaction and structure could be subject to change (any subsequent change may require a separate review). Later, the structure may have solidified but this may mean there is more time pressure if there are aspects of the structure which the ATO expresses concern about.
It is also important for foreign buyers to consider the level of detail provided as part of the process. In some circumstances, it may not be possible to provide final information before FIRB approval is obtained. In this case, information may be required to be provided after the transaction completes (typically within 90 days). Again, it is necessary to assess how best to progress the process.
The challenge is balancing early engagement (when structures may be fluid) with the need to provide sufficient detail to avoid delays or subsequent reviews.
- Where final information is not yet available, foreign investors should seek to agree upfront with tax authorities on the timing and content of follow-up disclosures, minimising the risk of “process stall”.
- Consistency of approach to investing in Australia from a structuring perspective is important – the ATO will look at patterns and themes emerging from a particular investor’s program of investment, and raise queries where structures depart from historical norms.
- For complex or innovative structures (e.G., stapled securities, hybrid financing), early dialogue and, where appropriate, advance rulings can deliver certainty.
2. Consider your exit: Going into an exit without a clear position on the tax treatment from the ATO can affect exit execution. Well advised foreign investors will therefore be engaging with the ATO ahead of exit. This engagement may be mandated by FIRB conditions attaching to the original FIRB approval. Alternatively, and in the absence of a FIRB-mandated engagement, the ATO will often seek to engage in advance with foreign owners regarding a mooted exit (often following media reports).
One of the challenges experienced with the ATO review ahead of exit is how long it can take. It is not unheard of for reviews to take over a year with the ATO being slow to provide a clearance. If the exit overtakes the ATO engagement, this creates its own issues. This is because the ATO will wish to protect the collection of tax in the absence of reaching a concluded view on the tax position of the exiting investors. We have seen the ATO take a number of different approaches, each with varying levels of disruption to the exit timetable. Approaches have included:
- garnishee notices being issued to buyers (or the threat of such notices being issued). Where this occurs, a portion of the buyer’s purchase price is required to be paid to the ATO; and
- requests or requirements for security to be provided to the ATO. Security arrangements allow for deals to complete while the tax treatment of the exit is still being considered by the ATO. However, following completion of the transaction, the ATO may still take a significant amount of time to resolve the position, slowing the potential distribution of sale proceeds to the sellers.
It is also worth highlighting that a delay in clearance from the ATO regarding the tax treatment of an exit may also impact the clearance given by other regulators in respect of the transaction (most notably an incoming buyer’s FIRB approval).
On exit, the ATO’s engagement can materially impact deal execution. Delays are not uncommon, with the ATO sometimes taking over a year to resolve complex cases.
- Foreign owners should therefore consider engaging the ATO well in advance of any planned exit, leveraging private ruling processes where feasible.
- The ATO may require security or seek to garnishee part of the sale proceeds pending resolution—potentially disrupting FIRB approval timing, closing mechanics and seller distributions.
3. Consider your engagement with state revenue authorities: For deals involving land or property, state revenue authorities add a further layer of complexity. Duty assessments can be slow, especially in multi-asset or cross-jurisdictional transactions.
- Early lodgement and engagement with state revenue authorities is essential to avoid settlement delays. If any part of a transaction needs to settle through the PEXA Exchange system duty will need to be assessed and paid before settlement can occur.
- Sponsors should map interactions between federal and state regimes, as de-risking one can have unintended consequences for the other.
4. Adapting to a digitised, less personal regulatory environment: As the Australian authorities search for efficiency and shift to digital portals and depersonalised interactions, dealmakers can no longer rely on “soft” regulatory relationships (either personal or via their advisers) to smooth the process. Instead, robust documentation, process discipline, and a track record of credible engagement are now likely to become critical differentiators.
Advanced Practical Tactics for Regulatory Advantage
So, what practical steps can be taken by those seeking to gain an advantage in the Australian M&A regulatory clearance processes? In our view, there are several:
- “No surprises” principle - Regulators value transparency and consistency. Proactive, full disclosure—backed by robust evidence—reduces the risk of drawn-out reviews and creates goodwill that can be leveraged in negotiations.
- Playbook for auctions - In competitive processes, dealmakers and their advisers should:
- Articulate a clear, credible regulatory strategy in their bids.
- Offer sellers enhanced execution certainty (e.g., by demonstrating pre-engagement with key regulators, or by accepting more robust conditionality).
- Use regulatory readiness as a differentiator, especially where other bidders are less prepared.
- Portfolio-level regulatory mapping – For financial sponsors and others with multi-asset programs, develop a regulatory “map” that tracks current and future filings, cumulative impacts, and precedent conditions. This will enable better risk management and more strategic engagement with authorities.
- Resource allocation and specialist teams - Invest in in-house or external regulatory specialists who can drive process, coordinate across agencies, and maintain institutional knowledge. Consistency in adviser teams should deliver compound returns over time.
- Post-approval compliance management - Regulatory conditions are increasingly evergreen rather than “point-in-time.” Best-in-class buyers will appropriately resource their compliance, reporting, and audit functions, and engage with regulators on an ongoing basis to manage evolving expectations.
Conclusion: Turning Regulatory Complexity into Opportunity
The Australian M&A regulatory environment is now more complex. For those who approach regulatory strategy as a core element of value creation and risk management, the opportunities are real. The winners will be those who plan early, engage deeply, and treat compliance as a source of competitive differentiation, not just a box to tick.
The Australian M&A regulatory landscape now demands:
- Rigorous planning: strategic forethought is non-negotiable—apply it deal-by-deal and across investment programs.
- Clear alternatives: identify and prepare fallback positions to maintain momentum when surprises arise.
- Adviser quality: leverage top-tier advisors who can coordinate across regulatory touchpoints and develop consistent strategies over time.
- Competitive positioning: use the regulatory environment as a differentiator in auctions and negotiations.
- Relationship management: develop and invest in long-term relationships with regulators—credibility and engagement pay dividends.
- Lifecycle mindset: manage regulatory risk not just at acquisition, but throughout the investment and exit lifecycle.
King & Wood Mallesons is uniquely positioned with market-leading expertise across all key regulatory domains. Our dedicated team helps our clients navigate, anticipate, and turn regulatory complexity into strategic advantage. Please reach out to discuss how we can partner with you on your next transaction.
Stay tuned for our forthcoming publication, which will unpack the contractual and deal mechanics essential for managing regulatory risk—and seizing opportunity—in Australian M&A.
