New Merger Test and SME Deals

The new merger laws are designed to change Australia’s merger control from a judicial enforcement model to a primarily administrative model.  Following a transitional period, the new mandatory merger control regime becomes fully operational in approximately 6 months – on 1 January 2026.  From that time, the previous ‘voluntary notification’ regime will go, and a new mandatory notification scheme will commence for deals that meet monetary thresholds.

This means that from 1 January 2026, businesses must notify the ACCC of any acquisition of shares or assets, that meet the new ‘notification thresholds’.  The obligation to notify includes the acquisition of interests in land, units in unit trusts or interests in managed investment funds.

The starting point for any analysis of the merger control regime in Australia is section 50 of the Competition and Consumer Act 2010 (Cth (CCA), which prohibits the acquisition of shares or assets ‘if the acquisition would have the effect, or be likely to have the effect, of substantially lessening competition in any market’. The ACCC has the power to grant merger authorisation if it is satisfied that a proposed merger is not likely to substantially lessen competition (SLC) or would be likely to result in a new benefit to the public.

The old law provided a formal notification path and an ‘informal merger review’ process.  For SME deals, which have a habit of throwing up interesting issues in niche “markets”, the informal process worked well.  It allowed merger parties to seek the ACCC’s view on whether a proposed merger or acquisition is likely to SLC, and while there was no legislation underpinning the process, it offered a level of certainty because parties could obtain a view from the ACCC before a merger occurred.

Under the new regime, if a proposed transaction meets the monetary thresholds or falls within specific sectors, notification is mandatory.  A business proposing to enter a transaction which is likely to fall below the mandatory notification threshold may lodge a waiver application.  Waiver notifications are voluntary and are intended to provide a flexible mechanism for businesses to seek relief from the notification requirement where acquisitions should not need to be notified, because, on the information provided, they are unlikely to meet the monetary thresholds or do not raise competition risks that need further investigation. The review of a waiver application is a more formal process driven by legislation.

Once a notification has been lodged, the application may move through two phases:

• Phase 1 is an initial assessment period of up to 30 business days.
• Phase 2 is a detailed review that can take up to 90 business days.

The review process includes a potential fast-track determination after 15 business days in Phase 1 for acquisitions deemed unlikely to substantially lessen competition.  If Phase 2 is triggered, the ACCC will issue a Notice of Competition Concerns within 25 business days.

The ACCC must make a decision within the specified timeframes unless the timeframe is extended.  There are limited circumstances in which the timeframes may be extended or adjusted by the ACCC, including for a change of material fact, failure of the notifying party to provide information, or a request by the notifying party for more time to respond to the Notice of Competition Concerns

Acquisitions that are ‘notified’ (including voluntarily) or are ‘required to be notified’ will be ‘stayed’ an if the acquisition is ‘put into effect’ prior to the ACCC’s merger determination and parties will be deemed to be in contravention of the CCA.

Following ACCC approval, a transaction must not be completed until at least 14 calendar days after the date of approval (to allow time to apply to the Competition Tribunal to review the ACCC’s merger determination).

An acquisition will require notification to the ACCC where:

• it meets new monetary thresholds;
• it involves an acquisition of control; and
• the target is ‘connected with Australia”.

There are exceptions (including if the ACCC has granted a waiver application) and there are certain types of acquisitions that must be notified, regardless of the thresholds.

For a typical SME transaction, the formal notification thresholds may not be reached.  However, the prohibition on transactions that substantially lessen competition continues to apply, meaning that parties still need to consider whether the acquisition raises competition concerns, even if it is not notified.

In cases of doubt, a party may decide to apply for a waiver.  If granted, formal notification will not be required.  This provides some certainty to parties considering a merger transaction.  There is also a process for ‘pre-notification engagement’, which can be used on a confidential basis to raise any issues and seek clarification, in anticipation of the lodgement of an application.  It is hoped the approach will reduce the likelihood of extensive information requests and delay.

Waiver applications will not be kept confidential and will be available on the ACCC’s Acquisition Register.  Interested third parties can make submissions.

The ACCC expects to approve up to 80% of mergers in 15 to 20 business days, either during the Phase 1 or notification waiver process).

On 30 June 2025 the government published a determination that sets the filing fees and notification thresholds under the new merger control regime.  For SME deals, the fees are now significant, and the risks are high.  The application of the new rules must be considered before proceeding with a proposed merger.

Relevantly for small to medium enterprises, the costs are as follows:

• Notification waiver application $8,300
• Notification of proposed acquisition (Phase 1) $56,800 (where a waiver application is rejected, the acquisition must be notified if the acquisition is to proceed).
• Additional fee for mergers that proceed to Phase 2 where the transaction value (greater of market value or consideration for the deal (shares and assets) is $50m or less) – $475,000

There is an exemption for acquisitions made by ‘small businesses’ (having a turnover of less than $10m, as defined in the ITAA).

For SME mergers, the new merger control regime has the potential to create more uncertainty and add to the procedural complexity related to clearing competition regulation.  Failure to notify the ACCC of a ‘notifiable acquisition’ will result in a transaction being automatically void.  Therefore, it is critical for all SME boards to consider the competition impact of a proposed acquisition.

When an SLC question arises, the risk profile for a board assessing a new deal has now changed.  In particular:

• the method of seeking inexpensive ‘informal clearance’ has changed and a board must consider a published waiver application to obtain guidance from the ACCC; and
• a board must assess (before proceeding) if the transaction justifies the significant fees potentially payable to the ACCC if a waiver application is not granted and formal notification is required for the deal to proceed.

The stakes are arguably higher for small deals because the costs and risk profile is disproportionately larger when compared to large transactions.  We think the following considerations are relevant:

• There is no flexibility in the new rules and there is the very real prospect that a smaller transaction being pushed into Phase 2 reviews by the merger control regime (if the deal is to proceed). Fees payable for Phase 2 reviews would total over A$1m.
• For a typical SME transaction that happens to raise an SLC question, the fees may represent a barrier to a merger progressing at all. It is likely that the SME board decision will include a judgement call about the risk associated with the cost of the deal, rather than simply an assessment of whether the deal will SLC in the relevant market.
• An SME board will also consider the prospect of a challenge in the Federal Court under the new rules, seeking to unwind the deal or injunct the transaction. There is a risk that a deal can be voided by way of an application by a disgruntled shareholder or competitor.  The prospect of having to go to the Federal Court to resolve the question may act as a material barrier for smaller transactions.

Overall, we expect to see instances where prospective acquisitions will be reconsidered, and deals will be repriced, because the likely fees will directly impact the deal value to the acquirer.

This article was co-written by Jonathan Gorsevski, Lawyer.

This article is not legal advice.  It is intended to provide commentary and general information only.  Access to this article does not entitle you to rely on it as legal advice.  You should obtain formal legal advice specific to your own situation.  Please contact us if you require advice on matters covered by this article.