Merger reforms: Government publishes important amendments ahead of 1 January 2026 commencement

For corporate groups and private capital, the turnover of ‘connected entities’ is required to be included in calculating the turnover that may trigger the notification thresholds. An entity is a ‘connected entity’ of another entity if the second entity is a related body corporate of the first entity, or if the first entity controls the second entity, is controlled by the second entity, or both the first entity and second entity are controlled by another entity. In this context, ‘control’ has the meaning of section 50AA of the Corporations Act and that control can be either alone or together with one or more associates (within the meaning of Chapter 6 of the Corporations Act).

For the purposes of assessing whether the turnover thresholds are met, the Amended Determination updates the ‘connected entities’ definition such that a company cannot be considered an associate of another company merely because there is an agreement that provides both companies with minority shareholder protection rights. Minority shareholder protection rights means, among other things, the rights to be reasonably appropriate and adapted to achieving the purpose of protecting a minority shareholder’s financial interests in their capacity as an investor and do not have the capacity to control or practically influence the composition of a company’s board, the appointment or termination of senior managers of a company, or decisions about a company’s financial and operating policies. This amendment comes into effect on 1 January 2026.

While this helpfully narrows the ‘connected entities’ definition for the purposes of aggregating revenue for determining whether the monetary thresholds are met, it only applies to unlisted bodies corporate that are not widely held (typically private companies with 50 shareholders or less).  It is not available for Chapter 6 entities and it is not applicable to ascertaining whether there has been an acquisition of ‘control’ under s 51ABS of the Competition and Consumer Act, which includes situations where a person and one or more associates jointly have the capacity to control.  The remaining elements of the connected entities definition, which we reported on here, remain in place.

The Amended Determination clarifies the approach to attributing revenue for the purposes of asset acquisitions.  The amendments introduce a distinction between acquisitions that represent all, or substantially all, of the assets of a business and acquisitions of discrete assets that do not represent all, or substantially all, of the assets of a business.  The updated thresholds for assets acquisitions do not come into effect until 1 April 2026.

1. Where the acquisition is of all, or substantially all, of the assets of a business, the amount to be calculated for the purposes of determining whether the monetary threshold has been met is the Australian revenue of the target to the extent that revenue is attributable to the business. 

   The economy-wide thresholds for asset acquisitions are:

   • The combined revenue of merger parties (including connected entities) on contract date is >$200 million; and

   • Revenue of assets being acquired is >$50 million; or

   • The transaction value is >$250 million (calculated as the greater of market value or consideration under sale agreement).

   The thresholds for acquisitions by very large corporate groups are:

   • The acquirer (including connected entities) has revenue on contract date of >$500 million; and

   • Revenue of assets being acquired is >$10 million.

2. Where the acquisition is of discrete assets – that is an acquisition of assets where the asset does not form all, or substantially all, of the assets of a business – an acquisition will need to be notified if:

   • The combined revenue of merger parties (including connected entities) on contract date is >$200 million; and

   • Transaction value is >$200 million (calculated as the greater of market value or consideration under sale agreement).

   The thresholds for acquisitions by very large corporate groups are:

   • The acquirer (including connected entities) has revenue on contract date of >$500 million; and

   • Transaction value is >$50 million (calculated as the greater of market value or consideration under sale agreement).

New exclusions have also been introduced to the cumulative (or serial) acquisition thresholds.  As a reminder, the serial acquisition thresholds apply to similar acquisitions that have taken place over the last three years.  The carve outs now include (in addition to the existing exclusion for transactions involving revenue of <$2 million):

• share acquisitions where the acquirer has not begun, or cannot begin to control, the target body corporate

• assets that have subsequently been divested or disposed of, or

• if the acquisition is of an asset, the acquisition does not have the effect that a person will, or can, acquire all, or substantially all of the assets of a business, and the market value of the asset is <$2 million.

Section 51ABS of the Competition and Consumer Act 2010 (Cth) (the CCA) exempts notification of acquisitions of shares where (i) the acquirer does not, immediately post‑transaction, control the target (as defined in section 50AA of the Corporations Act and modified by the CCA); (ii) or the acquirer already controlled the target pre‑transaction (together, the Non-Control Exemptions). The Amended Determination introduces defined classes of share acquisitions for which the Non-Control Exemptions would not apply, so that those transactions must still be notified even when control is not obtained. These amendments do not come into effect until 1 April 2026.

The Amended Determination designates the following scenarios where the acquisition requires notification if they meet the monetary thresholds:

• Acquisition of shares in a company that is not a Chapter 6 entity or listed on a foreign approved stock exchange, where the acquirer’s voting power increases from <20% to >20%. However, to ensure that only acquisitions of material voting power over the entity are captured, when calculating an acquirer’s voting power, the votes of entities which are considered associates only because they have entered into, or have proposed to enter into, an agreement with the person for minority shareholder protection rights should be disregarded.  According to the EM, this provision is intended to provide a bright line for determining material influence, consistent with the “substantial interest” test under Foreign Acquisition and Takeovers Act 1975 (Cth) (FATA), and is a clear and administrable standard that avoids subjective inquiries into control while ensuring the ACCC is notified of transactions that could alter market dynamics.

• Acquisition of shares in any body corporate (listed or unlisted, foreign or domestic), where the acquirer’s voting power moves from >20% but <50%, to an end point that is >50%. In calculating an acquirer’s voting power, the votes of entities who are considered associates only because they have entered into, or have proposed to enter into an agreement with the person for minority shareholder protection rights are also to be disregarded. The EM states that the 50% threshold is intended to be a bright-line marker for transitions to majority control and applies regardless of whether the acquirer had control previously. This is because having 50% voting power is the point at which a principal party gains the capacity to unilaterally pass ordinary resolutions, appoint or remove directors, and shape corporate strategy.

• Where the target is a Chapter 6 entity, and:

  • The principal party already controls the target, and the voting power moves from < 20% to > 20%. The EM describes this change as an integrity safeguard, addressing a potential gap that could otherwise arise where a person already controls a listed or widely held entity below the 20% threshold.  For example, without the amendment, a principal party who establishes control of a listed company while holding less than 20% voting power could increase their voting power above 20% without notification as (i) the initial acquisition would be exempt under s51ABT (below 20% voting power in a Chapter 6 entity); and (ii) subsequent acquisitions would be exempt under s51ABS(1)(b) (as the person already has control).

  • The principal party does not control the target immediately before or after the acquisition, and the voting power moves from < 20% to >50%. The EM considers this amendment fills a potential residual gap for Chapter 6 entities if a principal party gains 50% or more voting power without obtaining statutory control.  It also captures exactly 50% holdings as an integrity measure.

The above proposed amendments will have the greatest impact on investment in private and non‑widely held entities because it requires notification of the acquisition of shares resulting in holding a 20% interest or more even in the absence of any governance rights change or board appointment. This could require an analysis of ACCC notification thresholds (and potential filing, if those thresholds are met) for a much broader range of minority interest transactions, such as private equity and growth capital transactions, founder sell‑downs, exercises of options, consortium structuring and incremental stake‑building with governance rights typical of private company shareholder agreements.

One positive for global investors is an express carve‑out from the 20% private‑entity trigger for bodies corporate listed on an approved foreign exchange. According to the EM, this recognises foreign listed entities are already subject to regulatory oversight under list rules and applicable laws in their home jurisdiction, and they are captured where acquisitions cross majority (50%) thresholds.

The Amended Determination also introduces a new exemption for acquisitions of land that occur in the ordinary course of business.  The exemption is intended to apply to routine acquisitions of legal or equitable interests in land.  While the EM notes that each acquisition must be considered on its facts, it sets out examples of what may or may not be considered ‘ordinary course of business’:

• Examples of acquisitions of land that may occur in the ordinary course of business:  The acquisition of an interest in land for the purpose of an office, headquarters or other routine trading activities, the acquisition of office towers for the purposes of commercial property investment, or a property development company acquiring land to develop residential or commercial property.  Other examples provided in the EM include retailers leasing or acquiring land for a warehouse to store their inventory, a manufacturer leasing or acquiring land for a new manufacturing facility, an energy generator acquiring land for a solar farm, or an energy distributor acquiring land to build pylons on.

• Examples of acquisitions of land that may not occur in the ordinary course of business:  Acquisitions of land for the purposes of land-banking, land that a competitor is currently operating their business on (such as a supermarket buying the property in which a direct competitor is currently leasing), and the transfer of production or supply capacity from one competitor to another (such as a manufacturing business acquiring the lease of one of their direct competitors’ manufacturing facilities).

Whether an acquisition of land is in the ‘ordinary course of business’ will need to be considered on a transaction-by-transaction basis and is not dependent on the acquirer’s specific business.  The conclusion will need to be based on the industry and broader economic context in which a business is operating, having regard to a number of factors.  The exemption will not be available for supermarkets, which will be required to notify all acquisitions of land that meet the relevant thresholds.

The Amended Determination now expressly addresses a situation where:

• an acquirer previously acquired a legal or equitable interest in a quasi-land right

• that previous acquisition was notified (or not required to be notified because it received an ACCC waiver)

• that same acquirer then acquired a subsequent interest that has:

  • the same proportion of ownership interest in the right

  • has materially the same entitlements as the previous interest.

Previously, it was unclear whether the acquisition of the subsequent interest would require another notification given it is not technically the same transaction as the previous acquisition. However, the Amended Determination has helpfully made clear that in this situation, the subsequent interest would not need to be notified.

The Amended Determination also adds new exemptions and refines some of the existing exemptions based on stakeholder feedback. These amendments include:

• Broadening the classes of acquisitions that are exempt when made by a person acting in an external administration capacity.

• Changes to the exemption for acquisitions that occur under contractual rights to close out, set off or combine accounts in the content of financial market infrastructure.

• Clarifications to exemptions for acquisitions relating to derivatives, foreign exchange contracts, debt instruments, money lending, financial accommodation and security interests.

• Clarifications to exemptions for acquisitions undertaken by nominees and other trustees.

• Introduction of a new exemption for acquisitions by superannuation entities involving transfers of members’ benefits between superannuation entities and change of trustee.