Mergers and Acquisitions in Australia: Legal Framework, Due Diligence, Regulatory Approvals and Tax Considerations

Introduction

Mergers and acquisitions (M&A) are important tools for business expansion, corporate restructuring and international investment in Australia. Through mergers and acquisitions, companies can enter new markets, acquire technology, expand their customer base, strengthen their competitive position or restructure their operations.

Although the terms are frequently used together, mergers and acquisitions are not identical. A merger generally involves combining businesses or corporate structures, while an acquisition involves one party obtaining shares, assets or control of another business. The legal structure chosen determines the approvals, contractual obligations, tax consequences and liabilities that may arise.

Australia has a comprehensive framework governing M&A transactions. The Corporations Act 2001 (Cth) regulates various aspects of corporate transactions, while the Australian Competition and Consumer Commission (ACCC) administers Australia's mandatory merger control regime, which commenced on 1 January 2026. Certain acquisitions must be notified to the ACCC and cannot proceed until the required approval or notification waiver has been obtained. <Cite refs={["turn107415search0","turn107415search7","turn107415search12"]}/>

For Australian companies, foreign investors and international corporate groups, understanding these requirements before entering into a transaction is essential to managing risk and achieving a successful outcome.

1. What Are Mergers and Acquisitions?

Mergers and acquisitions refer to transactions through which businesses combine, transfer ownership or acquire control over another company or business.

Mergers

A merger involves combining businesses or their operations to achieve commercial objectives such as reducing costs, expanding market share or improving operational efficiency. Depending on the transaction structure, the companies may combine their operations while maintaining separate legal entities, or the transaction may result in one entity acquiring another.

Acquisitions

An acquisition occurs when a company, investor or other purchaser obtains shares, assets or another legally recognised interest in a business. The purchaser may acquire full ownership, a controlling interest or a more limited interest, depending on the agreement and applicable law.

Common acquisition structures include:

• Share acquisitions: The purchaser acquires shares in the target company.
• Asset acquisitions: The purchaser acquires selected assets or business operations.
• Business acquisitions: The purchaser acquires a business as a going concern, subject to the transaction structure and applicable legal requirements.
• Takeover bids: A formal offer is made to acquire securities in a company under the relevant takeover rules.
• Schemes of arrangement: A statutory, court-supervised process may be used to implement a transaction involving shareholders or creditors.
• Management buyouts: Existing management acquires all or part of the business, sometimes with external financing.

The correct structure depends on the parties' objectives, the target's legal and financial position, regulatory requirements and the allocation of risk between the buyer and seller.

2. The Legal Framework for M&A Transactions in Australia

Several legal regimes may apply to a merger or acquisition in Australia.

Corporations Act 2001

The Corporations Act 2001 (Cth) establishes important rules concerning Australian companies, directors' duties, shareholder rights, takeover bids and schemes of arrangement. The relevant provisions depend on whether the transaction involves a private company, a listed entity, a takeover or another corporate arrangement. <Cite refs={["turn107415search3","turn107415search13"]}/>

Competition and Consumer Act 2010

The Competition and Consumer Act 2010 (Cth) provides the legislative framework for Australian competition law. The ACCC assesses certain acquisitions to determine whether they may substantially lessen competition.

Foreign investment rules

Foreign investors may need to consider Australia's foreign investment framework, including whether notification or approval is required under the applicable legislation and regulations. The answer depends on factors such as the investor, the target, the nature and value of the investment, the relevant sector and any applicable exemptions.

Tax legislation

M&A transactions may create income tax, capital gains tax (CGT), goods and services tax (GST) and other tax consequences. The treatment depends on the assets or shares involved and the circumstances of the parties. The Australian Taxation Office (ATO) specifically identifies mergers, acquisitions and business asset sales as transactions that can involve complex tax issues. <Cite refs={["turn107415search35"]}/>

Other laws may apply to employment, intellectual property, privacy, property ownership, financial services and regulated industries.

3. Australia's Mandatory Merger Control Regime

An essential step in planning an M&A transaction in 2026 is determining whether the acquisition must be notified to the ACCC.

Australia's mandatory merger control regime commenced on 1 January 2026. Acquisitions that satisfy the relevant notification thresholds and are not exempt generally must be notified before completion. Where notification is required, the parties must obtain ACCC approval or an applicable notification waiver before proceeding. <Cite refs={["turn107415search0","turn107415search6"]}/>

Notification thresholds

The thresholds are based on factors including Australian revenue, global transaction value and, in certain circumstances, cumulative acquisitions. Additional rules may apply to particular asset transactions, changes in voting power and acquisitions in specific circumstances.

Whether a transaction is notifiable depends on the detailed statutory tests, the connection with Australia and any applicable exemptions. Parties should not rely on a general revenue figure or transaction description without checking the rules relevant to their specific deal. <Cite refs={["turn107415search6","turn107415search12"]}/>

Competition assessment

The ACCC considers whether an acquisition is likely to substantially lessen competition in a relevant market. Its assessment may examine:

• The number and strength of existing competitors.
• The market shares of the buyer and target.
• The likelihood of new competitors entering the market.
• The availability of alternative products or services.
• The effect on customers, suppliers and business partners.
• Whether the acquisition could reduce innovation, choice, quality or output.
• Whether the transaction could strengthen the purchaser's market power.

The fact that a transaction offers commercial benefits does not automatically mean it will be approved. The competition assessment depends on the likely effects of the particular acquisition. <Cite refs={["turn107415search7","turn107415search34"]}/>

Consequences of non-compliance

Completing a notifiable acquisition without the required approval may create serious legal consequences. Depending on the applicable provisions, a transaction may be prohibited or invalid, and penalties or other enforcement measures may apply.

For this reason, competition law review should take place at the beginning of the transaction rather than immediately before completion.

4. Due Diligence in Mergers and Acquisitions

Due diligence is the process of investigating the target company or business before the parties complete a transaction. It helps the purchaser understand the target's financial position, legal obligations, assets, liabilities and commercial prospects.

Legal due diligence

The legal review may include:

• Company registration records and constitutional documents.
• Shareholder agreements and ownership records.
• Board and shareholder resolutions.
• Existing litigation, regulatory investigations and disputes.
• Material contracts, leases and financing arrangements.
• Intellectual property rights and licences.
• Property ownership and security interests.
• Compliance with applicable laws and regulatory obligations.

Financial due diligence

Financial due diligence examines the target's financial statements, revenue, cash flow, liabilities, debt arrangements and working capital. It may also identify contingent liabilities, unusual transactions or financial risks that could affect the purchase price.

Tax due diligence

The parties should examine tax returns, outstanding tax liabilities, GST compliance, payroll-related obligations and any ongoing disputes with tax authorities. The review should also consider whether the proposed transaction could create tax liabilities or whether particular reliefs may be available.

Commercial due diligence

Commercial due diligence focuses on the target's market position, customer relationships, suppliers, business model, competitors, growth prospects and operational risks.

Employment and intellectual property due diligence

Employment contracts, employee entitlements, workplace obligations and proposed changes to staffing should be reviewed. The parties should also verify ownership of intellectual property, software, trademarks, patents and other commercially important rights.

A thorough due diligence process helps the parties negotiate an appropriate purchase price and include suitable warranties, indemnities, conditions precedent and termination rights in the transaction documents.

5. Share Purchase Agreements and Asset Purchase Agreements

The transaction agreement is one of the most important documents in an M&A deal.

Share Purchase Agreement

A Share Purchase Agreement (SPA) governs the sale and purchase of shares in a company. The buyer generally acquires the shares and indirectly obtains the economic benefits and risks associated with the target company.

Because the target remains the same legal entity, its existing obligations generally remain with it, subject to applicable law and the transaction terms. Due diligence is therefore particularly important when the target has historical liabilities, disputes or regulatory exposure.

An SPA commonly addresses:

• The purchase price and payment arrangements.
• Completion conditions.
• Representations and warranties.
• Indemnities for specified risks.
• Disclosure of relevant information.
• Restrictions between signing and completion.
• Regulatory approvals and cooperation obligations.
• Termination rights and remedies.
• Dispute resolution and governing law.

Asset Purchase Agreement

An Asset Purchase Agreement (APA) governs the sale of identified assets or business operations. The agreement should specify exactly which assets, rights, contracts and liabilities are being transferred or retained.

Asset acquisitions may require separate assignments, registrations, third-party consents or regulatory approvals. Contracts and licences do not necessarily transfer automatically, and employment, tax and property issues should be assessed separately.

Choosing the appropriate agreement

The choice between a share purchase and an asset purchase depends on the parties' commercial objectives, the target's liabilities, tax considerations, the required consents and the regulatory position.

Neither structure is universally preferable. The transaction should be designed after reviewing its legal, financial and operational consequences.

6. Shareholder Rights and Takeover Rules

Shareholder rights can be central to an M&A transaction, particularly where the target is a listed company or the acquisition involves a substantial change in ownership.

The Corporations Act 2001 (Cth) contains takeover provisions that may apply to acquisitions of voting interests in relevant companies. The precise requirements depend on the type of entity, its ownership structure and the transaction method.

ASIC's Regulatory Guide 9 provides guidance on takeover bids, while its guidance on schemes of arrangement explains the regulator's role in reviewing relevant scheme documents. <Cite refs={["turn107415search13","turn107415search3"]}/>

Relevant issues may include:

• Whether shareholder approval is required.
• Whether a takeover bid or scheme of arrangement is appropriate.
• The information that must be provided to shareholders.
• The treatment of minority shareholders.
• Voting procedures and applicable thresholds.
• Conflicts of interest involving directors or major shareholders.
• Whether compulsory acquisition or buyout provisions may become relevant.

Shareholders should carefully review the proposed consideration, transaction terms and disclosure materials before making decisions. Directors must also comply with their applicable legal duties and manage conflicts appropriately.

7. Foreign Investment in Australian Businesses

Australia is an important destination for international investment, but certain foreign acquisitions may be subject to additional review.

Foreign investors should determine whether their proposed investment falls within Australia's foreign investment framework. Requirements may depend on the investor's identity and ownership, the target's business activities, the type and value of the investment, the relevant sector and any applicable exemptions.

Depending on the transaction, foreign investment considerations may include:

• Acquisitions of shares in Australian companies.
• Purchases of Australian land or interests in landholding entities.
• Investments in sensitive or regulated sectors.
• Transactions involving foreign government investors.
• Conditions imposed on an approved investment.
• Reporting and compliance obligations after completion.

Foreign investment review and ACCC merger control are separate regulatory questions. A transaction may need to be assessed under both regimes, and obtaining one approval does not necessarily satisfy the other.

International investors should therefore establish the full list of required approvals before signing binding transaction documents or committing to a completion date.

8. Tax Implications of Mergers and Acquisitions

Tax planning is a fundamental part of any Australian M&A transaction. The tax consequences can differ significantly between a share sale, an asset sale and a corporate restructuring.

Capital gains tax

The disposal of shares or assets may trigger capital gains tax. The calculation and timing of any liability depend on the relevant asset, the seller's circumstances, the transaction structure and the applicable tax rules.

Some transactions may qualify for specific rollover relief, but relief is conditional and should not be assumed to apply automatically.

Goods and Services Tax

GST may be relevant to the sale of business assets or other supplies. Certain transactions may qualify for special treatment, including where the statutory conditions for a sale of a going concern are met. The contractual wording and actual circumstances should be reviewed by a qualified tax adviser.

Tax consolidation

Where a corporate group restructures its Australian operations, tax consolidation rules may become relevant. The acquisition of a company may affect the tax treatment of assets, group membership and future tax obligations.

Stamp duty and state or territory taxes

The transfer of land or certain interests in landholding entities may give rise to stamp duty or related state and territory tax issues. The relevant rules depend on the location and nature of the assets and the structure of the transaction.

Market valuations

Market valuation may be important for tax purposes, especially in complex restructures, related-party transactions or transactions involving difficult-to-value assets. The ATO recommends careful consideration of valuation methods and independent valuations where appropriate. <Cite refs={["turn107415search35"]}/>

Tax planning should be completed before the transaction structure is finalised. The parties should obtain advice from appropriately qualified Australian tax professionals.

9. Representations, Warranties and Indemnities

Representations, warranties and indemnities allocate risk between the buyer and seller.

Representations and warranties

The seller may make statements about the company's financial position, contracts, assets, employees, tax compliance and legal disputes. If a statement is inaccurate, the buyer may have a contractual claim, subject to the agreement's terms and applicable law.

Indemnities

An indemnity may require one party to compensate the other for specified losses or liabilities. Indemnities are often negotiated for identified risks, such as a known tax dispute, pending litigation or a particular contractual obligation.

Limitations and exclusions

M&A agreements may contain time limits for claims, financial caps, minimum claim thresholds, disclosure provisions and other restrictions. The effect of these terms should be understood before signing.

The buyer should ensure that the agreement provides appropriate protection for risks identified during due diligence. The seller should also understand the potential extent and duration of its post-completion liability.

10. Employment, Contracts and Business Continuity

A merger or acquisition may affect employees, customers, suppliers and other business partners. The legal consequences depend on whether the transaction involves a share transfer, asset transfer or another structure.

Employment matters

The parties should review employment agreements, employee entitlements, applicable awards or enterprise agreements, workplace health and safety obligations and any planned organisational changes.

Where a business or assets are transferred, specific employment transfer rules may become relevant. The parties should not assume that all employment arrangements will continue unchanged or that all obligations will automatically transfer in the same way.

Commercial contracts

Important customer and supplier contracts should be reviewed for change-of-control, assignment, termination and consent provisions. A transaction may require notification or consent from counterparties.

Licences and permits

Some business licences, regulatory approvals and permits may be specific to the existing legal entity and may not transfer automatically to a purchaser. The parties should identify any approvals that must be obtained or reissued.

Data and intellectual property

The parties should examine privacy obligations, data-sharing arrangements, cybersecurity risks and ownership of intellectual property. These issues are particularly important in transactions involving technology companies, online services or businesses with substantial customer databases.

Careful planning helps reduce the risk of interruption to business operations following completion.

11. Common Challenges in M&A Transactions

Mergers and acquisitions can create significant commercial opportunities, but they also involve risks.

Regulatory delays: Competition or foreign investment reviews may extend the transaction timetable.

Undisclosed liabilities: The target may have historical tax debts, litigation, contractual breaches or other liabilities that were not initially identified.

Valuation disagreements: The buyer and seller may disagree about the value of the business, future earnings or contingent liabilities.

Financing difficulties: The buyer may be unable to secure the necessary funding or satisfy lender conditions.

Shareholder disputes: Minority shareholders may challenge aspects of the transaction or disagree with the consideration offered.

Integration problems: Different management structures, technology systems and workplace cultures can make it difficult to achieve the expected benefits.

Tax uncertainty: The intended tax treatment may not be available under the applicable legislation.

Cross-border complexity: International transactions may require compliance with multiple legal systems, regulatory authorities and reporting obligations.

Many of these risks can be reduced through early planning, thorough due diligence, carefully drafted agreements and realistic completion conditions.

12. A Practical M&A Transaction Process

Although each transaction is different, the following stages provide a general overview.

1. Define the transaction objective: Establish the commercial reasons for the merger or acquisition.
2. Identify the appropriate structure: Decide whether a share acquisition, asset acquisition, takeover bid, scheme of arrangement or another method is suitable.
3. Conduct preliminary assessments: Review the target's ownership, financial position, contracts, liabilities and regulatory status.
4. Assess regulatory requirements: Determine whether ACCC notification, foreign investment approval or other regulatory consent may be necessary.
5. Carry out due diligence: Investigate the target's legal, financial, tax, commercial, employment and operational position.
6. Negotiate transaction documents: Agree on the price, warranties, indemnities, conditions precedent, completion arrangements and termination rights.
7. Obtain necessary approvals: Complete the required corporate procedures and obtain relevant regulatory and third-party consents.
8. Complete the transaction: Transfer the shares or assets, deliver the consideration and make required filings.
9. Implement post-completion integration: Update corporate records, integrate systems, manage employees and maintain regulatory compliance.

The exact order and duration of these stages depend on the transaction structure, the parties' circumstances and the applicable law.

Frequently Asked Questions

1. What is the difference between a merger and an acquisition?

A merger generally describes the combination of businesses or corporate structures. An acquisition involves obtaining shares, assets or another interest in a business. In practice, a transaction described as a merger may legally be structured as an acquisition.

2. Does every M&A transaction require ACCC approval?

No. Australia's mandatory merger control regime applies to acquisitions that meet the relevant notification requirements and are not exempt. Where notification is required, the parties generally must obtain approval or an applicable notification waiver before completion. The current ACCC rules should be checked for each transaction. <Cite refs={["turn107415search0","turn107415search6"]}/>

3. Can a foreign investor acquire an Australian company?

Yes, subject to applicable Australian laws and any required approvals. Depending on the transaction, the investor may need to consider foreign investment rules, competition law, corporate law, tax obligations and sector-specific requirements.

4. What documents are commonly used in an M&A transaction?

Common documents include a confidentiality agreement, letter of intent or heads of agreement, due diligence requests, a Share Purchase Agreement or Asset Purchase Agreement, disclosure schedules, shareholder resolutions and regulatory filings. The required documents depend on the transaction.

5. What is due diligence in an acquisition?

Due diligence is the investigation of a target business before completion. It helps the buyer assess financial performance, liabilities, contracts, tax exposure, legal disputes, employees, intellectual property and other material risks.

6. What taxes can arise from an M&A transaction?

Potential consequences include capital gains tax, GST, corporate income tax and state or territory duties. The outcome depends on the transaction structure, the parties and the assets or shares involved.

7. How long does an M&A transaction take in Australia?

There is no universal timeframe. A relatively straightforward private-company acquisition may be completed more quickly than a transaction involving complex due diligence, shareholder approval, competition review, foreign investment approval or a court-supervised scheme of arrangement.

8. Can an M&A transaction be cancelled after signing?

Possibly. The parties' rights depend on the transaction agreement, any unmet conditions precedent, termination provisions and applicable law. Cancellation may lead to contractual liability if a party has no valid right to terminate.

Conclusion

Mergers and acquisitions in Australia require careful planning across corporate law, competition regulation, foreign investment, taxation, employment and commercial contracts. Choosing the appropriate transaction structure and identifying the necessary approvals at an early stage can help protect the parties' interests and reduce the risk of costly delays.

The mandatory ACCC merger control regime introduced on 1 January 2026 makes early regulatory assessment especially important for acquisitions that may meet the relevant notification thresholds. International transactions may require additional coordination between Australian advisers and professionals in other jurisdictions.

Cosmos Legal Law Firm focuses on international legal matters and cross-border legal coordination within the scope of its services. For an M&A transaction involving Australia, clients should obtain advice from appropriately qualified Australian corporate, competition and tax professionals where required.

Legal Disclaimer

This article is provided for general informational and educational purposes only. It does not constitute legal, tax, financial or investment advice and should not be relied upon as a substitute for advice tailored to a specific transaction. Laws, regulations, thresholds and administrative guidance may change. Readers should verify the current requirements and consult appropriately qualified professionals before taking action.

Official Resources

• Australian Competition and Consumer Commission (ACCC): Mergers and acquisitions
• ACCC: Thresholds for notifying acquisitions
• ACCC: Guidance documents for the merger control regime
• Australian Securities and Investments Commission (ASIC): Schemes of arrangement — Regulatory Guide 60
• ASIC: Takeover bids — Regulatory Guide 9
• Federal Register of Legislation: Corporations Act 2001
• Australian Taxation Office (ATO): Australian Taxation Office