Australian mandatory merger clearance regime – what insurers can expect and what to prepare for

In the biggest overhaul of merger control laws in over 50 years, Australia is moving from a voluntary to a mandatory merger clearance regime. If the Treasury Laws Amendment (Mergers and Acquisitions Reform) Bill 2024 (the Bill), currently before the Senate becomes law, acquisitions that meet certain thresholds will need to be approved by the Australian Competition & Consumer Commission (ACCC), from January 1, 2026.

The amendments will have repercussions across the insurance sector, for insurers operating in Australia and for players looking to merge into the Australian market.

 

Which mergers will require approval?

From January 1, 2026, acquisitions of shares and assets meeting specified monetary thresholds must be notified and approved by the ACCC. Transactions pending ACCC approval will be suspended, and transactions without prior approval will be void and subject to steep penalties.

Notified transactions will be assessed under the current test of whether they substantially lessen competition – though the new test will be extended to transactions that create, strengthen, or entrench substantial market power. Further, the ACCC can aggregate the impact of similar transactions over the past three years. All notified transactions will be publicly available on a new ACCC register, though confidentiality can be requested for surprise hostile takeover bids.

 

Relevance to insurance M&A

It’s expected that most M&A activity by Australian insurers and insurance brokers will be captured by the new reforms due to the proposed monetary screening thresholds. Acquirers in this space generally have large turnover and will have to notify their transactions and await formal approval before proceeding, despite the fact that the relevant markets, particularly for insurance brokers, may be highly fragmented.

Parties using a growth by M&A model (such as most of the large insurance brokerage houses) will now have the viability of that model tested as their current ability to move quickly and without compliance cost burden will be affected by:

• a minimum notification and determination period of 30 business days (which will require parties to include a “condition precedent” to completion under the relevant sale document);
• a filing fee of between AUD50,000 to AUD100,000 per transaction, along with legal fees to support the notification – this is in addition to other existing M&A costs, like seeking Foreign Investment Review Board (FIRB) approval by foreign investors;
• internal compliance to monitor the aggregation of value of historical transactions with those that are planned to ensure compliance with the three-year look-back test period.

Insurers with aggressive consolidation strategies may also face substantive hurdles, as the ACCC seeks to test the limits of the new laws (which it has indicated it will use to target roll-up strategies).

Our expectation is that there will be an uptick in M&A across the broader Australian insurance market during 2025 in advance of the reforms taking effect on January 1, 2026. Applications that haven’t received the regulator’s green light by the end of 2025 will have to reapply under the new process, so acquirers will have the opportunity to apply under the new process from July 2025. From 2026 onwards, many insurers and brokerage houses with large M&A pipelines will be affected by the notification process.

In advance of the reforms coming into effect insurers should:

• collaborate with external legal counsel to establish precedent merger notification mechanisms for sale documents;
• prepare a standardized ACCC notification form for “routine” transactions to simplify and partially automate the notification process – this will require regular analysis of the relevant market and the acquirer’s position within it;
• implement processes to ensure accuracy in documents and emails related to transactions, which may need to be produced for notified transactions; and during the second half of 2025,
• consider if new transactions completing in 2026 need a condition precedent for notification to ensure compliance if not completed by December 31, 2025.

To the extent these new costs cannot be passed on to relevant sellers (via effective reductions in the purchase price), it’s possible that the growth by M&A model may change, producing a decrease in individual valuations (where demand lessens), and a greater focus on large portfolio acquisitions and consolidation of existing market leaders.

However, there may be a silver lining for smaller acquirers that don’t meet the thresholds, who may fare better in M&A, offering more compelling bids in competitive sales.