Business cautiously back Labor’s merger reforms, but say more talks needed to avoid red tape

Corporate Australia says Labor’s planned changes to merger laws might not have caved into ACCC demands, but could see more deals done before 2026 to beat the changes.

Major reforms by the Albanese government may trigger a bounty of small to mid level mergers in the next 18 months as companies act ahead of a clampdown in 2026 from the competition regulator, experts say.

From January 2026, companies will be required to notify the Australian Competition and Consumer Commission about a proposed merger or acquisitions above a certain threshold, who would need to be satisfied that a deal would not lessen competition.

The reforms also spell out clear guidelines around appeal rights for merger parties with parties able to go straight to the Australian Competition Tribunal, which analysis from King & Wood Mallesons shows should be quicker and cheaper for businesses.

But McGrathNicol Advisory partner David Barnaby said the changes could place low to mid level deals under the microscope of the ACCC and might result in more deals being done ahead of the January 2026 start date.

“It does feel that the existing rules have been more applicable to the bigger end of town but some of these changes could now impact the low and mid sized companies,” he told The Australian.

“Until we know what the threshold is, it will just add more uncertainty to M&A activity.”

“We could also find ourselves in a scenario where it actually accelerates some deals from businesses who want to get something in place before the new rules come into place in 2026.”

King & Wood Mallesons competition law partner Caroline Coops said business had a victory in that the government did not give the ACCC all that it wanted, by not shifting the onus of proof to companies to prove the substantially more difficult argument that their mergers were not anti-competitive.

“That’s a good outcome for merger parties, but the ACCC may feel that their concerns about the current regime ‘being skewed towards clearance’ have not been addressed,” she said.

“The government has struck a balance that provides certainty for merger parties, while also dealing with the ACCC’s concerns that it was not being notified of transactions that it thinks it should have been.”

But the test that a merger does not result in a “substantial lessening of competition”, introduced in 1993, will be “clarified” to include if the deal “creates, strengthens or entrenches a position of substantial market power in any market”.

Deloitte Australia Access Economics lead partner Dr Pradeep Philip says competition was key to better outcomes for the economy.

The tech sector, which has been touted by M&A advisers as an expected hotspot for activity this year as companies look to an IPO or deal that allows investors to generate a return on investment, wants the government to engage further with industry on proposed changes.

Tech Council of Australia acting CEO Ryan Black said getting reform details right was critical to ensure that Australia remained globally competitive for fostering growth and investment in tech.

“An effective and well-balanced regulatory regime for mergers and acquisitions is critical for the growth of Australia’s economy and our tech sector,” he said.

“We encourage the government to engage further with industry on proposed changes to assess creeping or serial acquisitions, to ensure it doesn’t have the effect of lowering the standard for what is considered to be a substantial lessening of competition or provide the ACCC with the ability to prohibit mergers that are not anticompetitive.”

Business groups agreed that merger reform was needed amid concerns in the public around competition. Deloitte Access Economics lead partner Pradeep Philip told The Australian that competition is key to the vitality and dynamism of the economy.

While he said the government got the balance right, it was key it got the implementation right otherwise it risked hurting growth or increasing the burden of operating.

“From an economic point of view driving more competition the economy is really important for the vitality and dynamism aspects which have been on the slide for over two decades in Australia,” he said.

“If it results in more bureaucracy, increases the burden of doing business, slows down unnecessary activity in M&A activity then that can be a real drag on growth.”

Jim Chalmers announced the proposed merger changes on Wednesday. Picture: Nikki Short/NCA NewsWire

Reforms had been welcomed by shareholder groups who were optimistic that new measures would deliver better outcomes and certainty for companies.

“We don’t think the added cost passed onto companies is a material impact as there is already cost in making transactions,” Australian Shareholders Association CEO Rachel Waterhouse said.

“We are hopeful for efficiencies by the regulator and decisions that don’t too long or go through the court multiple times.”

Business Council chief executive Bran Black said close consultation will be required to ensure businesses aren’t burdened with unintended consequences, such as adding further red tape to business.

“Mergers can lead to diversification and efficiencies that benefit consumers, and the ability of businesses to acquire, dispose, restructure and merge forms an integral part of commerce,” he said.