The new Australian merger regime, set to take effect from 1 January 2026, introduces stricter regulatory oversight by the Australian Competition and Consumer Commission (ACCC). For accounting firms considering mergers, acquisitions, or private equity transactions, this means greater scrutiny, mandatory notifications, and potential regulatory intervention, even if a transaction doesn’t meet predefined thresholds.
Understanding how to navigate ACCC scrutiny and prepare for M&A under these new laws is essential. This article outlines the key regulatory changes, risks for accounting firms, and practical steps to ensure compliance.
What’s Changing in Australia’s Merger Regime?
The Treasury Laws Amendment (Mergers and Acquisitions Reform) Act 2024 significantly changes the rules governing mergers in Australia. The ACCC will now have expanded powers to review mergers, even in cases where they do not meet the mandatory notification thresholds.
Key Regulatory Changes That Will Impact Accounting Firms:
1. Mandatory Notification Thresholds
- Mergers and acquisitions that exceed financial or market concentration thresholds must be reported to the ACCC before completion.
- These thresholds will be set in 2025 and are expected to consider deal size, combined market share, and industry competitiveness.
2. ACCC’s Increased Scrutiny on High-Risk Sectors
- The Treasurer now has the power to designate certain industries as “high-risk” sectors, which will be subject to stricter ACCC reviews.
- Professional services, including accounting and financial advisory firms, could be classified as high-risk due to increasing industry consolidation.
3. ACCC Can Review Mergers Even Below Notification Thresholds
- The ACCC will have discretionary authority to intervene in mergers even if they do not meet mandatory reporting thresholds.
- This power allows the ACCC to prevent mergers that could reduce competition, particularly in highly concentrated markets.
4. Longer Merger Review Timelines
- The ACCC will have up to 30 business days for a Phase 1 review and 90 business days for a Phase 2 review.
- This means merger approvals could take months, affecting deal completion timelines.
5. Harsher Penalties for Non-Compliance
- Merging without ACCC clearance where required could render a transaction void.
- Firms face substantial financial penalties and legal repercussions if they fail to comply with the new laws.
What This Means for Accounting Firms Considering M&A
1. Increased Due Diligence Requirements
- Accounting firms seeking mergers or acquisitions will need to conduct more rigorous competition risk assessments before proceeding.
- Expect more scrutiny from private equity investors who will require detailed regulatory risk assessments before finalising deals.
2. Stricter Review for Large and Mid-Sized Accounting Firms
- The ACCC may closely monitor transactions involving large firms to prevent excessive market consolidation.
- Mid-sized firms planning to merge or acquire smaller firms must anticipate potential intervention, particularly if they serve a significant portion of a regional or industry-specific market.
3. Impact on Valuation and Deal Timelines
- Longer regulatory review processes may delay M&A transactions, requiring firms to build in contingency periods.
- Firms that proactively address regulatory risks upfront may secure higher valuations and faster deal closures.
4. Private Equity (PE) Firms Will Be More Cautious
- PE firms are major players in accounting firm acquisitions and will now require additional legal and compliance safeguards.
- Transactions that involve recurring revenue models, such as SaaS-based accounting services, will likely see more interest from investors despite the increased scrutiny.
How Accounting Firms Can Prepare for ACCC Scrutiny
1. Identify Whether Your Merger Will Require Notification
- Understand the ACCC’s upcoming financial and market share thresholds for mandatory notification.
- Assess potential competition risks early to determine whether the deal could trigger ACCC scrutiny.
2. Engage with the ACCC Early
- Pre-lodgement discussions with the ACCC can help firms gauge whether their deal raises competition concerns.
- Early engagement reduces the risk of surprises later in the review process.
3. Strengthen M&A Due Diligence
- Conduct a thorough competition impact analysis before finalising any M&A deal.
- Work with legal and competition law experts to assess whether the deal could attract regulatory intervention.
4. Develop Alternative Deal Structures
- Consider structuring deals to reduce competitive risks, such as partnerships or phased acquisitions rather than outright takeovers.
- Explore carve-out options or divestitures that might help secure ACCC clearance.
5. Educate Clients on the New Laws
- If your firm provides M&A advisory services, ensure clients are fully aware of the longer review timelines and stricter requirements.
- Provide guidance on regulatory compliance strategies to minimise risks and delays.
Final Thoughts
The new Australian merger regime significantly expands the ACCC’s authority, making it essential for accounting firms to reassess their M&A strategies. With higher scrutiny, stricter notification thresholds, and potential intervention in smaller deals, firms must adopt a proactive compliance approach.
By understanding these changes and preparing ahead of time, accounting firms can navigate the regulatory landscape effectively, ensuring smooth M&A transactions and sustained business growth in an evolving market.