A medical practice owner in Sydney can receive an attractive offer, sign a term sheet, and still discover that the transaction cannot complete on the proposed timetable. The problem may sit in an ACCC notification, foreign resident capital gains withholding, or the accounting treatment of acquired assets rather than in the headline price. A merger and acquisition in Australia is therefore a coordinated commercial, regulatory, tax and accounting decision, not a negotiation over dollars.
When a Merger and Acquisition Becomes the Right Move
By Panbo Ye, CFP® | FCPA | SSA® | Founder, Everglow
A merger and acquisition, commonly called M&A, occurs when one business combines with or acquires another. In a buy-side transaction, the buyer is seeking control, capability, customers, property, people or strategic access. In a sell-side transaction, the owner is testing value, succession options, liquidity and the terms on which control may pass.
Consider an Australian business owner reviewing a term sheet late in the afternoon. The proposed price looks reasonable, but the buyer wants a share acquisition, an earn-out and a completion condition tied to regulatory approval. The owner's accountant is focused on tax, the lawyer is focused on warranties, and the lender is asking whether the combined cash flow can support the proposed debt. Each adviser may be correct, yet the transaction can still fail if nobody owns the timetable as a whole.
The right question is not just, “What price am I being offered?” It's whether the proposed structure preserves value after tax, funding costs, regulatory delay, accounting adjustments, employee obligations and integration work. A business owner considering growth through acquisition should also distinguish an M&A strategy from a franchise expansion strategy. A practical blog for franchise operators can help clarify when repeatable operating systems and licensing may be more suitable than buying an entire business.
Who this article is for
This guide is for Australian SME owners, medical professionals, fund managers, overseas entrants, entrepreneurs and advisers assessing a purchase, sale, merger or strategic investment. It's also relevant to a buyer comparing an asset deal with a share deal, or to a seller whose business has valuable contracts, licences, property interests or goodwill that require careful treatment.
The Australian market is large but cyclical. Treasury notes that Australia has no official M&A dataset, while its administrative-data work suggests around 1,500 mergers a year. That baseline supports a practical conclusion. Transactions occur regularly, but each deal still requires its own analysis of control, funding, tax, approvals and execution risk. Businesses preparing for growth may also benefit from a structured review of business growth strategies before approaching a target.
Currency note: This article reflects Australian rules, thresholds and regulator guidance current as at 08/2026.
The Shape of the Australian Deal Market Right Now
Headline deal volume can give the wrong impression if it's read without transaction value and sector mix. Australian M&A reporting shows that completed deals fell to 720 in 2025, with aggregate value of A$61 billion, compared with 1,044 deals and about A$95 billion in 2024. The 2022 peak reached 1,296 transactions worth close to A$200 billion, according to Australian Treasury's merger analysis. The figures demonstrate a cyclical market, not a simple decline in appetite.
Quarterly data show the same divergence more sharply. In Q2 2025, Australia recorded 169 transactions worth US$35.6 billion. Deal count was down 29.6% year on year, while aggregate value rose 250.5%. In Q4 2025, 172 transactions worth US$20.3 billion represented a 30% fall in deal numbers and a 51.4% increase in value. These figures are reported in S&P Global's Australian M&A analysis and the King & Wood Mallesons DealTrends report.
What the divergence means for buyers
Fewer deals with greater aggregate value generally means that capital is concentrating around larger, more strategic transactions. S&P Global reported inbound aggregate value up 173.5% year to date and outbound value up 81.7%, while domestic value fell 14.1%. For a mid-market buyer, the practical implication is that competition may come from strategic and cross-border acquirers with different funding capacity, return hurdles and reasons for buying.
That doesn't make smaller transactions irrelevant. It does mean that a buyer should be clear about its specific advantage, such as local relationships, operational expertise, sector knowledge or the ability to complete without unnecessary complexity. A selective market rewards disciplined target screening more than broad enthusiasm.
Reading the market through legal mechanisms
The Reserve Bank of Australia has used ASIC takeover and scheme-of-arrangement filings to build a more systematic record of Australian M&A activity. These are the two principal legal pathways used for mergers, and the filing data help advisers examine transaction mechanism, volume and characteristics rather than relying only on announced-deal databases. A takeover and a scheme can produce different outcomes for timing, control transfer and completion certainty, so structure is an observable strategic choice, not merely drafting preference.
Practical rule: Treat market data as a reference point, not a valuation answer. The relevant comparison is the proposed transaction's sector, mechanism, funding profile and regulatory path.
The Merger and Acquisition Lifecycle as a Critical Path
A successful transaction moves through linked decisions. If the buyer starts with a price before defining its strategic objective, or negotiates documentation before testing regulatory conditions, later discoveries can force a repricing or delay.
Strategy and target screening
The first artefact should be a written acquisition thesis. It should state why the buyer needs the target, what capability or cash flow is being acquired, and what would make the transaction unattractive. A target-screening process can then examine ownership, customers, contracts, licences, employees, systems, property, debt and integration constraints.
A seller's equivalent starting point is an organised information memorandum supported by reliable financial, operational and legal information. Buyers lose confidence when management accounts cannot be reconciled to tax returns, customer concentration is unclear, or key agreements depend on consent that nobody has checked.
Valuation and commercial diligence
Valuation should connect to maintainable earnings, working capital, capital expenditure, customer quality and the cost of integration. Commercial diligence tests whether the revenue story survives contact with customers, competitors and operational capacity.
Financial diligence should identify normalised earnings, unusual expenses, related-party arrangements, debt-like items and completion-account risks. Tax diligence should examine income tax, goods and services tax, payroll tax, employment matters, property taxes and historical compliance. A structured due diligence checklist helps keep those questions visible across the advisory team.
Structure, funding and regulatory sequencing
The buyer then chooses between an asset acquisition, share acquisition, takeover or scheme, subject to the facts. The financing model should show debt service, equity contributions, working-capital needs and downside resilience. Funding decisions should be considered alongside debt and equity financing rather than after the price is agreed.
From 1 January 2026, an acquisition meeting the Australian Competition and Consumer Commission (ACCC) thresholds must be notified and cannot complete until approval or a waiver is obtained. The ACCC process therefore belongs in the pre-signing timetable. Depending on the target and ownership, Foreign Investment Review Board processes, tax clearances, third-party consents and industry approvals may also affect the critical path.
Documentation and integration
The sale and purchase agreement should allocate identified risks through conditions precedent, warranties, indemnities, price mechanisms, restraint provisions and completion deliverables. An earn-out needs measurable definitions, information rights and a process for disagreements.
Before completion, management should prepare an integration 100-day plan covering people, systems, customers, reporting, banking, payroll and decision rights. A transaction adviser should connect these workstreams. A useful background guide to transaction advisory services can help readers understand the breadth of coordination required, although the actual scope must be customized to the transaction.
Choosing the Right Deal Structure in Australia
Australian merger structures involve both legal mechanics and commercial consequences. The RBA's use of ASIC filings makes takeovers and schemes observable pathways for analysis, while the choice between assets and shares determines what transfers, what remains with the seller and how tax and accounting diligence should be performed.
A takeover generally involves an offer to shareholders to acquire their shares. A scheme of arrangement is a court-supervised process in which the target company proposes an arrangement with its members, subject to the required approvals and court involvement. Neither pathway is automatically preferable. The recommendation depends on ownership dispersion, shareholder support, timing, control objectives and the level of certainty required.
| Feature | Takeover | Scheme of Arrangement |
|---|---|---|
| Core mechanism | Offer made to shareholders | Target-led arrangement requiring court supervision |
| Control path | Control builds as shareholders accept | Can provide a coordinated route if approvals are achieved |
| Timing | Depends on offer process and acceptances | Depends on preparation, meetings and court timetable |
| Minority position | May require further steps if not all holders accept | May support a more unified implementation, subject to approvals |
| Main question | Can the buyer secure sufficient acceptances? | Can the target obtain the required support and court approval? |
An asset deal allows the buyer to select the assets and liabilities it wishes to acquire, subject to contracts, consents and applicable tax treatment. It may reduce exposure to some historical liabilities, but transferring employees, contracts, licences, permits and customer relationships can be complex. A share deal transfers ownership of the company and usually preserves its operating platform, but the buyer acquires the company with its history and contingent liabilities.
Accounting is not an afterthought
Australian Accounting Standard AASB 3 requires the acquisition method for business combinations. The method involves identifying the acquirer, determining the acquisition date, recognising and measuring identifiable assets and liabilities and any non-controlling interest, and then recognising and measuring goodwill or a bargain-purchase gain. The result is not a simple cost-plus entry.
A purchase-price allocation, commonly called a PPA, may assign value to customer relationships, brands, technology, property and other identifiable assets. That allocation can affect future depreciation, amortisation, impairment analysis and reported goodwill. Management should model the accounting outcome before signing because the balance-sheet effect may influence lender discussions, investor reporting and post-completion performance measures.
Regulatory and Tax Traps That Derail Closings
Approval, withholding and tax structuring can change the cash paid at settlement, the conditions in the agreement and the date on which control transfers. Treating them as late-stage administration leaves little room to correct the deal.
ACCC merger control
From 1 January 2026, acquisitions meeting the ACCC's mandatory thresholds must be notified and cannot complete until approval or a waiver is obtained. The ACCC describes a large merged-firm threshold where combined Australian revenue is at least A$200 million, and either target Australian revenue is at least A$50 million or global transaction value is at least A$250 million. Treasury's reform material also identifies notification where Australian turnover is at least $50 million for each of at least two merger parties, or global transaction value is at least $250 million.
Threshold application depends on the regime and the transaction facts. Advisers should test the parties' Australian revenue, connected entities, target relationships and transaction value rather than rely on the headline price.
The regime also includes a serial-acquisition threshold intended to address creeping consolidation. A buyer should map prior acquisitions before signing, including transactions involving connected entities or related target businesses. The sale and purchase agreement may need a clear regulatory closing condition, long-stop date, cooperation obligations and a defined allocation of risk if approval is delayed or refused.
Foreign resident withholding
For transactions on and from 1 January 2025, the foreign resident capital gains withholding rate increased from 12.5% to 15%, and the de minimis threshold reduced from $750,000 to $0. Foreign residents disposing of shares or other membership interests exceeding $20 million must notify the Australian Taxation Office (ATO) before the transaction, based on the stated tax developments.
These rules affect settlement funds even where the parties expect a different ultimate tax outcome. The legislation addresses taxable Australian real property, indirect Australian real property interests, and options or rights to acquire them. The amount payable is generally 10% of the first element of the asset's cost base just after acquisition, unless a varied amount applies. Purchaser obligations also depend partly on what the purchaser knows or reasonably believes about the counterparty's residency.
The non-resident withholding tax guidance should be considered alongside transaction-specific ATO and legislative advice. The agreement should identify who obtains certificates, who makes any required notification and how a withholding dispute is handled at settlement.
Small business CGT concessions
A seller may be considering the small business capital gains tax concessions, including the Division 152 concessions, but eligibility depends on the relevant entity, asset, turnover, net asset and active-asset conditions. A share sale and an asset sale can produce different outcomes for the seller and buyer.
The parties should model the tax result before fixing the structure, particularly where goodwill, business premises, shares, trusts or related entities are involved. The analysis should sit alongside the AASB 3 purchase-price allocation, because tax treatment and accounting treatment can produce different results for the same transaction.
Closing discipline: Put ACCC thresholds, withholding certificates, ATO notifications and CGT eligibility into the timetable before the agreement is signed. Settlement is too late to discover that cash must be withheld or approval remains outstanding.
A Worked Example and the Questions Buyers Actually Ask
Castle Medical is a GP partnership in Newtown, Sydney, considering whether to acquire a neighbouring practice for A$2 million. The partners want the patient relationships and staff, but they're concerned about inherited liabilities, lease consent and whether the combined practice can absorb the integration work without disrupting care.
An asset acquisition may allow Castle Medical to identify the goodwill, equipment, fit-out, records and contracts it wants to acquire. However, patient records, employment arrangements, leases, software and practitioner agreements require careful transfer analysis. A share acquisition may preserve the target company's operating arrangements, but Castle Medical would need deeper diligence over historical tax, employment, regulatory and contractual exposure.
The ACCC analysis shouldn't be based only on the A$2 million price. The partners need to test the parties' Australian revenue, the target's Australian revenue, connected entities and any serial-acquisition issues. The accounting team should then prepare an AASB 3 analysis if the transaction is a business combination, identifying the acquirer, acquisition date, identifiable assets and liabilities, and any goodwill or bargain-purchase gain. A specialist business valuation service may assist with the commercial valuation, but it doesn't replace legal, tax or regulatory advice.
Frequently asked questions
Does every Australian acquisition require ACCC approval?
No. Mandatory notification depends on the applicable ACCC thresholds and transaction facts. From 1 January 2026, a transaction that meets the relevant thresholds generally cannot complete until approval or a waiver is obtained. Buyers should test turnover, transaction value, Australian connections and serial acquisitions before signing.
Could a share transaction trigger foreign resident withholding?
It could, particularly where the interest is connected with taxable Australian real property or an indirect Australian real property interest. The purchaser should assess residency, asset composition, certificates, variations and ATO notification requirements before settlement.
Is an asset deal automatically better for the buyer?
No. An asset deal may offer selectivity, but contracts, licences, staff, records and property arrangements may be difficult to transfer. A share deal may preserve continuity, while exposing the buyer to the company's historical liabilities. The right structure depends on diligence and commercial objectives.
How does GST apply to a business sale?
GST treatment depends on the assets and transaction conditions. A sale may qualify as a going concern if the statutory requirements are met, but the parties should document the position and obtain transaction-specific tax advice rather than assume the treatment.
How should an earn-out be drafted?
An earn-out should define the relevant performance measure, accounting policies, information access, operational restrictions, reporting process and dispute mechanism. Ambiguous definitions can create conflict after completion, especially where the buyer controls business decisions.
How long should integration take?
There's no universal timetable. The plan should prioritise continuity of customers, staff, payroll, systems, banking, reporting and compliance. A written 100-day plan can establish ownership and sequencing, while more complex integrations may require a longer programme.
The right merger and acquisition approach depends on the target, structure, funding, tax profile, regulatory thresholds and integration capacity. Price matters, but a transaction only creates value when it can complete cleanly and operate effectively afterwards.
If you would like clarity on how these principles may apply to your own circumstances, contact Everglow on 1300 913 929 or email contact@everglow.au.
To book directly: Book a meeting with Panbo.
Tags: Australian merger and acquisition, M&A advisory, ACCC merger control, business acquisition tax, AASB 3, due diligence Australia, foreign resident withholding tax
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