In recent years, Australia’s Federal Government has engaged in a continuous program of intensifying the regulation of critical infrastructure assets and the assessment and approval regime for deals involving them.
Transactions relating to assets considered critical to the Australian national interest - from energy and water assets to healthcare and financial infrastructure - are now subject to extensive scrutiny from Australia’s foreign investment regulator, while the businesses operating those assets themselves now have enhanced cyber and reporting obligations.
At the same time, investors are looking for opportunities to deploy enormous pools of capital into secure assets with multi-decade horizons and infrastructure-like qualities. Traditional investment opportunities involving the passive, steady-yielding infrastructure assets that have been attractive to infrastructure and superannuation funds are increasingly rare, so those investors are moving up the risk curve to find acceptable returns while private equity funds are deploying secure asset or core-plus type strategies and meeting them in the middle. This middle ground is squarely in the zone of these critical infrastructure assets - sectors that are growing in importance and which matter profoundly to the lives of consumers.
This all means that these transactions are at the centre of a brewing regulatory storm.
Successfully executing transactions involving critical infrastructure assets has always required a deep knowledge of traditional M&A, financing and infrastructure concepts, but it now also demands an understanding of the increasingly complex regulatory environment around cyber security, national interest and ESG considerations.