The following article is a chapter from our latest report, M&A in Motion.
Access the full report here.
FIRB
The Mayne Pharma decision has changed how sellers think about FIRB risk. We’re already seeing sellers push for more visibility over FIRB engagement and stronger obligations on acquirers. At the same time, Treasury is consulting on some genuinely interesting reforms (particularly the idea of automatic approval for low-risk investors) which, if adopted, would be a real shift in how foreign investment is screened in Australia.”
Clementyne Rawlyk & Madeleine Kulakauskas
Outlook for 2026
FIRB Reform Proposals
In October 2025, Foreign Investment Review Board (FIRB) released a discussion paper proposing the most significant shake-up of the foreign investment framework in years. The centrepiece is a proposed automatic approval regime for low-risk investments by trusted investors – the first time FIRB has publicly canvassed moving away from its traditional prior approval model. Under the proposal, certain transactions would require notification to, but not approval from, FIRB, with the Treasurer retaining a callin power to intervene where national interest concerns arise. The approach is similar to Canada’s regime, and would mark a fundamental shift in how Australia screens foreign investment.
Other proposals include stricter rules for sensitive and emerging sectors, amendments to the tracing rules and an expanded ‘associates’ concept – measures that could significantly broaden FIRB’s reach.
Hamilton Locke made several submissions in response to the discussion paper, drawing on client feedback and our frontline experience navigating the regime. We’ll share further insights as the reforms take shape during 2026.
Enhanced FIRB Portal
Treasury’s ongoing commitment to FIRB’s Portal enhancement is expected to deliver improved functionality and more intuitive user interfaces throughout 2026, building on the consistent upgrades observed since launch. These enhancements should further reduce review timeframes for low-risk and straightforward applications, whilst the risk-based approach becomes more pronounced in practice, potentially widening the gap between expedited lowrisk approvals and extended timelines for complex or sensitive deals.
Reshaping Deal Protections
Lessons from Mayne Pharma: The Treasurer’s rejection of the Mayne Pharma takeover has introduced a new layer of regulatory uncertainty, signalling a shift in how Australian M&A may be structured. To mitigate the FIRB risks, we expect sellers to demand:
- a seat at the table: traditionally excluded from FIRB engagement, sellers will now insist on enhanced participation rights including strengthened contractual obligations on bidders to share all FIRB correspondence, obtain seller approval for key submissions and messages to FIRB, and allow sellers to participate directly in meetings with Treasury;
- tougher bidder obligations: expect sellers to impose more onerous contractual requirements on bidders regarding the types of FIRB conditions they must accept, shifting regulatory risk back onto the acquirer; and
- higher reverse break fees: to compensate for heightened regulatory volatility, sellers will demand increased “reverse break fees” or risk premiums.
Observations on 2025
FIRB under the spotlight
Mayne Pharma/Cosette Pharmaceuticals: After a failed attempt to terminate via a material adverse change clause, US bidder Cosette Pharmaceuticals changed tack, telling FIRB that it intended to close Mayne’s profitable South Australian manufacturing plant despite earlier statements in the scheme booklet that it had no plans to substantially change operations. In November 2025, Treasurer Jim Chalmers declined to approve the transaction (conditionally or otherwise), citing the need to ‘protect Australia’s national interest, the security of our critical medical supply chains, local jobs and the local community’. The decision handed Cosette the exit it sought, prompting accusations it had ‘weaponised’ FIRB to back out of the deal. The Treasurer’s claim that no conditions could have adequately addressed national interest concerns also drew scepticism, with critics questioning whether FIRB had been outmanoeuvred.
Santos: The A$36 billion ADNOC-backed bid collapsed in September 2025 during due diligence – before it ever reached FIRB. However, the transaction had piqued considerable interest amongst commentators, with speculation emerging early about how FIRB would assess sensitivities around domestic gas security, geopolitical and climate considerations. One can’t help but wonder whether this regulatory shadow (cast well before formal application) shaped the deal’s outcome. Its early demise left open the question: how would the Treasurer have ruled on Australia’s largest
ever foreign investment proposal?
Breaking new ground
In February 2026, the Federal Court of Australia slapped Indian Ocean International Shipping and Service Company Ltd (Indian Ocean) and its sole director and shareholder with A$14 million in penalties for breaching Australia’s foreign investment laws – the first case brought by a Treasurer under the foreign investment regime since its introduction in 1975. The case arose from the Treasurer’s June 2024 divestment order requiring Indian Ocean and four other foreign investors to sell their shares in Australian heavy rare earths-focused company Northern Minerals Limited to unrelated parties, due to national security concerns. When Indian Ocean transferred its shares to its director and sole shareholder, the Treasurer initiated unprecedented Federal Court proceedings.
The Court subsequently declared the transfer breached the disposal order. This outcome marks a significant escalation in FIRB enforcement, signalling the government’s willingness to pursue litigation and substantial penalties to ensure compliance with national security orders and conditions.
Heightened focus on tax integrity
Tax compliance has long been a key consideration in national interest screening, but 2025 saw significantly increased scrutiny, with FIRB directing particular attention to:
- internal restructuring, particularly transactions involving the migration of intellectual property or income-generating assets to low-tax jurisdictions; and
- private equity structures and pre-acquisition tax planning, particularly structures involving debt funding, management fee arrangements, and offshore holding entities.
FIRB also shifted away from standardised tax conditions towards transaction-specific requirements tailored to individual risk profiles, requiring more detailed tax submissions and extending negotiation periods.
The digital transition
The FIRB Portal became fully operational in April 2025, fundamentally changing application processes. Straightforward, low-risk applications have benefited from improved processing efficiency and clearer procedural pathways, whereas complex or multilayered transactions have encountered Portal constraints, with rigid data field requirements proving ill-suited to nuanced deal structures.
From September 2025, the Portal began requiring disclosure of competition risks, transaction party revenue data (in anticipation of the new merger control reforms) and ACCC notification status,
including for transactions which are clearly not notifiable to the ACCC or fall outside of Australia’s merger control regime entirely.
Decision Timelines
The Treasurer’s 2025 performance target of 30-day decisions for 50% of low-risk cases has not been consistently met. Whilst some straightforward applications have been determined within the 30-day window, many low-risk transactions continue to extend to 6 – 8 weeks. High-risk or sensitive transactions have maintained consistent decision timeframes of 4 – 6 months.
Competition
Mandatory, public and suspensory: Australia’s new merger clearance regime changes the choreography of almost every deal and competitive process. Build ACCC analysis into day one, clarify your regulatory timelines, and plan for third party participation in the assessment process.”
Alistair Newton
Section 50 of the Competition and Consumer Act 2010 (Cth) (CCA) has long prohibited any acquisition of shares or assets that would have the effect or likely effect of substantially lessening competition in a market in Australia.
From 1 January 2026, the CCA also imposes a mandatory and suspensory notification regime for acquisitions that meet certain party revenue and/or transaction value thresholds. Where those thresholds are met, an acquisition must be notified to the Australian Competition and Consumer Commission (ACCC) and must not complete unless and until ACCC clearance has been obtained. The ACCC is required to clear an acquisition unless it reasonably believes that the merger would have the effect, or likely effect, of substantially lessening competition in a market.
Following a formal notification, uncontentious acquisitions (e.g., no or very little competitive overlap) may obtain “fast-track” clearance in as little as 15 working days. The ACCC will otherwise have 30 working days to conduct a “phase 1” review. The ACCC has indicated that it expects to approve approximately 80% of mergers within 20 business days. If the ACCC is satisfied after its phase 1 review that the merger could substantially lessen competition, then the ACCC will progress to an in-depth “phase 2” review for a further 90 working days.
There is also a “waiver” process under which an acquirer can avoid a formal notification for very straightforward matters that plainly do not raise any competition concerns. However, early experience with the new regime indicates that the ACCC will grant a notification waiver only in the most straightforward matters in which the ACCC is not required to consider any substantive issue at any length.
Notifications and waiver applications carry the following (significant) filing fees:
- Notification waiver application: A$8,300;
- Phase 1 assessment: A$56,800; and
- Phase 2 assessment (variable based on transaction
value):- A$50 million or less – A$475,000;
- greater than A$50 million and up to A$1 billion –A$855,000; and
- greater than A$1 billion – A$1,595,000.
Observations on 2025 and predictions for 2026
Late 2025 saw significant uncertainty for dealmaking as the government tinkered with aspects of the new regime, including the critical thresholds for mandatory ACCC notification, as late as 18 December 2025. This period also saw a significant number of deals deliberately completed early and in advance of the introduction of the new regime, primarily to avoid a lengthy ACCC
approval process and associated filing fees.
As 2026 unfolds, we anticipate the new regime impacting transactions in at least the following ways:
Early ACCC analysis
Given the significant (and often unavoidable) time and cost implications of an ACCC process, a filing analysis will often need to form part of the earliest phase of legal work on a deal. This will be of particular interest to vendors in competitive processes, in which potential purchasers may not all have the requisite revenue to trigger a mandatory ACCC notification.
Conditions precedent and termination rights
Conditions precedent and termination rights will increasingly distinguish between different phases in the ACCC process. In particular, we expect that some transactions will be negotiated on the basis that a phase 1 approval (or even a waiver) will be required, with any phase 2 process avoided. Alternatively, we expect that parties will increasingly negotiate forms of cost-sharing so that filing fees and other costs are shared, particularly if the ACCC process goes to phase 2. Conditions precedent will also often need an explicit mechanism for deciding whether any ACCC-proposed
conditions are acceptable, who controls that decision, and what happens if acceptance would materially alter deal economics. Long-stop dates will also need to be set further into the future to account for lengthier ACCC review periods.
Transparency and confidentiality
An acquisitions register has been established for all notifications, which publicly discloses who the parties to the acquisition are, as well as a high-level description of the transaction. Confidential
and commercially sensitive information, such as transaction value, is not disclosed. In practice, this means that:
- all mandatorily notifiable transactions will become public ahead of ACCC clearance, which may not be received until after a protracted period; and
- it will no longer be possible for various potential acquirers (e.g., multiple bidders in a competitive process) to address merger control risks by engaging with, and obtaining a view from, the ACCC on a confidential basis and ahead of signing, which under the previous informal clearance process was common.
Further, the public nature of the ACCC’s review will provide significant additional scope for third parties (e.g., customers, suppliers and competitors) to involve themselves in the process and, potentially, reduce the likelihood of ACCC clearance (or at least increase the likelihood of a lengthy (and expensive) phase 2 review).
Document “hygiene”
An ACCC notification will often require the parties to provide information memoranda and internal board documents relating to transaction rationale, valuation, post-acquisition plans, competitive conditions, market shares and business plans, for up to two years prior to the date of notification. This creates additional risks in an ACCC process. Parties should be careful to ensure that all potentially relevant documents accurately reflect the competitive context in which the parties operate and the transaction will occur, and do not contain unsubstantiated speculation that may not be fully supported by evidence (but which may nevertheless be unhelpful in an ACCC process).
Tax
Market Health Check: Stable
Debt structuring conservatism data tell us?
We expect the new thin capitalisation and debt deduction creation rules (DDCR) will drive a permanent shift away from related-party debt financing and buyers will increasingly favour thirdparty
debt or equity injections to avoid permanent denial of deductions. Deals involving a debt pushdown into Australian targets will require early-stage tax modelling, with simpler capital structures replacing historical leverage approaches.
Valuation adjustments for denied deductions
Post-completion tax structuring constraints, particularly denied interest deductions, are likely to become central inputs in purchase price negotiations. We expect that buyers will discount valuations for targets with limited debt capacity, and earnout mechanisms may be adjusted to reflect post-completion tax efficiency.
Transfer pricing documentation demands
Following the release of the Tax Commissioner’s Practical Compliance Guideline PCG 2025/2 (restructures and the thin capitalisation rules and DDCR) and Draft Practical Compliance Guideline PCG 2025/D2 (factors to consider when determining the amount of inbound, cross-border debt), arm’s-length debt quantum analysis will likely become standard due diligence where related party debt exists in the target’s structure. Buyers and W&I insurers will require contemporaneous board policies, financial modelling and benchmarking studies before closing. Where targets do not have appropriate and contemporaneous transfer pricing documentation in place, sellers risk facing price adjustments or deal delays.
Did the Market in 2025 behave in line with our expectations?
Partially—though the timeline differed from our predictions.
Our 2025 outlook anticipated that the proposed expansion of the foreign resident capital gains tax (CGT) base would influence structuring decisions for renewable energy acquisitions. Whilst policy intent remained clear throughout 2025, no bill was introduced to Parliament during the year to effect the government’s announcement.
Despite the legislative delay, deal behaviour aligned with our expectations. Foreign buyers continued to factor potential latent CGT liabilities into valuations and due diligence. The absence of a bill did not eliminate structuring caution; rather, parties appeared to treat implementation as a matter of ‘when’ rather than ‘if’, and pricing negotiations reflected this uncertainty. The government’s subsequent deferral of the commencement date of the expanded foreign resident CGT rules to the first quarter after Royal Assent (being 1 January, 1 April, 1 July or 1 October) confirmed that
the measures remain policy priorities, validating the market’s prudent approach throughout 2025.
What happened in the tax M&A landscape during 2025?
One point that dominated 2025 was the acknowledgement and maturation of the new thin capitalisation and DDCR regime. The ATO’s publication of the final PCG 2025/2 in August 2025 and draft PCG 2025/D2 in May 2025 crystallised the Tax Commissioner’s compliance expectations around debt quantum, transfer pricing documentation and risk zones. Clients have needed to restructure their related party arrangements to avoid permanent denial of deductions, fundamentally altering acquisition financing strategies.
The removal of deductions for general interest charges and shortfall interest charges from 1 July 2025 compounded the compliance burden, whilst the introduction of substantial ACCC merger control fees from the transitional voluntary regime in July 2025 added material cost pressures to deal economics.
