If the first half of 2026 was expected to be defined by geopolitical uncertainty, the Australian M&A market told a different story.
While conflict, trade tensions, regulatory intervention and shifting political priorities continued to dominate headlines, they increasingly became background noise for experienced dealmakers. Rather than waiting for certainty, businesses adapted. The result was a first six months characterised by a resurgence in high-value transactions and a growing willingness to pursue strategic acquisitions despite an increasingly complex operating environment.
Geopolitical risk becomes a dealmaking constant
Geopolitical risk has shifted from an exceptional event to a permanent pricing variable. The question is no longer whether it exists, but how it is priced, allocated and managed.
Australia's foreign investment regime continues to evolve in response to an increasingly complex strategic environment. The Federal Government's reforms to FIRB (Further streamlining and strengthening the foreign investment framework) reinforce a more targeted, risk-based approach, with heightened scrutiny of investments involving critical infrastructure, advanced technologies, energy, agriculture and strategically significant assets. The Reforms are an explicit recognition of the shifting sands of geopolitics and non-traditional avenues for control and influence.
Sophisticated bidders no longer treat the national interest as a regulatory hurdle – but build it into the investment thesis. Energy Fuels' proposed acquisition of Australian Strategic Materials illustrates this geopolitical investment framing. The transaction is presented not simply as a corporate combination but as the creation of a Western focused ‘mine-to-metal’ rare earths supply chain aligned with the US-Australia Critical Minerals Framework. Positioning the deal within broader geopolitical objectives — strengthening allied supply chains and reducing reliance on Chinese processing — supports both its commercial and public interest case.
Regulatory approvals become a transaction strategy
Regulatory approvals are critical drivers of transaction timing, certainty and risk allocation. Rather than procedural milestones, regulatory approvals are central commercial considerations that shape the transaction, documentation and execution strategy. Carefully calibrated strategies focused on
regulatory engagement, comprehensive national interest analysis and proactive stakeholder management are essential components of any transaction.
Reflecting the importance of the conduct of the parties to secure regulatory approvals (especially in light of the Mayne issues last year Mayne Pharma: Act 3), we are increasingly seeing regulatory conditions which require the bidder to accept conditions acting both reasonably and in good faith. The introduction of an additional good faith standard means the bidder cannot act in a way that intentionally damages or delays the regulatory clearance process. We expect to see regulatory condition drafting increasingly framed in a manner that imposes an obligation on a bidder to act honestly, cooperatively and fairly to secure regulatory approvals.
The uncertainty of global relationships and the desire for bidders to act in a way which does not hinder or jeopardise securing regulatory approvals – we expect to see an increased use of ‘no syndication’ provisions.
Targets assess deal execution risk on bidder ownership at the time of approach and changes to ownership can have significant implications for obtaining regulatory approvals. In the Qube Holdings Limited Scheme Implementation Deed with the Macquarie Asset Management-led consortium, the bidder must not take any action that would result in changes to the ownership structure (including indirect and beneficial ownership), where the bidder forms a view, acting reasonably and in good faith, that the change in ownership would impact on its ability to obtain regulatory approvals or would result in conditions being imposed on the bidder that would not be acceptable to it.
Allocating the cost of regulatory uncertainty
Longer regulatory timetables also drive more sophisticated risk allocation. Ticking fees, reverse break fees and locked-box mechanisms are increasingly used to balance the economic consequences of delayed completion. In Qube, the Consortium has agreed a ticking fee of 2 cents per month (accruing on a daily basis from 15 December 2026) will be payable.
The US$5.6 billion acquisition by Alcoa of South32's aluminium value chain assets is a thoughtful case in point. The investment thesis for the transaction is framed as supporting economic resilience enhancing secure and reliable global aluminium supply at a time of accelerating demand for critical minerals and metals.
The announced transaction utilises both ticking fees and break fees. Under the transaction, Alcoa must pay a reverse break fee of 2.0% of the upfront cash and scrip consideration of the Transaction (US$82M)) in limited circumstances, including if the transaction is terminated because of a failure to satisfy certain regulatory approvals within a mandated timeframe.
Completion is also subject to a ‘locked box’ mechanism, under which Alcoa is entitled to the cash flow from the acquired assets from 1 April 2026. South32 will be paid a ticking fee equal to 5.0% per annum of the US$3.1B cash consideration calculated from the date of South32 shareholder approval of the Transaction to completion, payable at completion.
The evolving national interest landscape
Geopolitics is only part of the story. Domestic politics is also reshaping Australia's foreign investment settings and reshaping investment priorities. Across developed economies, rising populism has placed greater emphasis on economic sovereignty, domestic capability and the protection of strategic industries. Australia is no exception. Political support for stronger foreign investment controls has broadened beyond traditional national security concerns to encompass broader economic resilience and community expectations around ownership of critical assets – flipping the test from ‘contrary to the national interest’ to being in the public benefit.
Community sensitivity around foreign ownership, coupled with bipartisan political support for safeguarding strategic industries, has reinforced an increasingly cautious approach. Foreign investors and private equity sponsors are consequently navigating more rigorous public interest assessments, longer review periods and more detailed approval conditions. At the same time, governments are increasingly viewing domestic consolidation as a means of strengthening sovereign capability. ‘Buy Australian’ sentiment aligns with broader industrial policy objectives designed to reduce dependence on fragile global supply chains and increase domestic resilience across critical sectors.
AI drives demand for strategic infrastructure
These themes extend beyond traditional industries into the rapidly developing artificial intelligence economy. US export controls on advanced semiconductors, restrictions on technology transfers and wider supply-chain fragmentation have accelerated a global shift towards digital sovereignty.
This is reshaping investment priorities. Rather than focusing solely on AI software businesses, strategic investors are increasingly pursuing acquisitions of domestic data centres, compute infrastructure, fibre networks and energy assets capable of supporting AI deployment locally. We expect the remainder of 2026 to see governments and investor alike focus on locally developed AI capabilities or regional solutions (see Dealmaking: the new cartography) across the supply chain.
Regulatory preparedness as a competitive advantage
For Australian dealmakers, regulatory strategy is no longer a separate from commercial strategy — it is commercial strategy. Success increasingly depends not only on identifying attractive assets, but on anticipating political priorities, understanding evolving national interest considerations and allocating execution risk appropriately.
The most successful transactions will be those designed from inception to navigate foreign investment scrutiny, competition regulation and shifting political priorities. As geopolitics becomes embedded in everyday dealmaking, regulatory preparedness will be the defining competitive advantages in Australian M&A.
