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Company Takeovers – Mergers & Acquisitions

Did you know that Australia prides itself on maintaining a competitive business market?

It does this through the use of specific legislation that limits the effect that some mergers or acquisitions of businesses may have on market competition. By maintaining a diverse market of businesses for services, products and goods, competition is improved and the flourishing economy is supported fiscally speaking. 

A merger is a legal consolidation of two business entities into one, whereas an acquisition occurs when one entity takes ownership of another entity’s stock, equity interests or assets. They may be completed to expand a company’s reach or gain market share in an attempt to create shareholder value.

Generally speaking, the distinction between the two becomes a little less clear as both types of transactions may result in consolidation of business (and thus a shrinkage in market availability of diversity) but both are legally defined and structured to do different things. They may also have different requirements to be adhered to when it comes to legal compliance.

General Regulations

To ensure that there is not total market domination with regard to ownership of the primary businesses, Australia’s Competition and Consumer Act (CCA) prohibits those mergers that would diminish the competition (or have the effect thereof) in the business market. Under its merger guidelines, the ACCC encourages merger parties to notify the Australian Competition and Consumer Commission in advance if completing a transaction if

  • The products of the merger parties are either substitutes or complements and
  • The merged company will have a post-merger market share in those products of greater than 20% in any Australian market.

The Corporations Act regulates the acquisition of direct and indirect interests in both Australian listed companies and companies with more than 50 members and listed managed investment schemes (usually unit trusts, like REITs). In particular the laws prohibit the acquisition of an interest which results in any person’s voting power in a Widely Held Entity increasing to more than 20% (or any person’s voting power increasing between 20% and 90%). There are exceptions to this rule, including:

  • acquisitions under a formal takeover bid in which all target shareholders can participate
  • schemes of arrangement
  • acquisitions with the approval of a majority of the shareholders who are not parties to the transaction
  • acquisitions of no more than 3% of the voting rights every six months (known as the creep rule)
  • acquisitions under rights issues and underwriting arrangements
  • “downstream” acquisitions of shares in Australian companies that result from “upstream” acquisitions in companies listed on the Australian Securities Exchange (ASX) or on certain foreign stock markets approved by the Australian Securities and Investments Commission (ASIC).

The ACCC may seek injunctions to prevent closing or penalties and divestiture orders for completed  transactions if acquisitions contravene the competitive diversity of the market established thus far. 

Foreign Investment Regulation

The Foreign Acquisitions and Takeovers Act (FATA) contains complex provisions regulating the acquisition directly or indirectly by foreign persons of, among other things, shares in australian companies. Foreign investment must be consistent with australia’s national interest, otherwise it may not pass the clearance requirements. 

Civil penalties can be imposed if a foreign person undertakes certain transactions without first obtaining the relevant clearance. The general rule is that a foreign person needs approval to acquire a “substantial interest” (20% or more) in an Australian corporation (or holding company of an Australian corporation) where the target is valued above certain thresholds.

If you are looking to acquire another company, organisation or business in the field, but are uncertain about your clearance for doing so, speak with us today. We can assist you in ascertaining whether or not you may be legally able to do so.

If you’re someone who often finds it difficult to make large lump sum payments for goods or services, you may want to consider looking into “Buy Now Pay Later” services.

Buy now pay later essentially means that, rather than paying in a full lump sum payment for a product or services rendered, there may be an option to pay through instalments of a certain amount over a set period to make the sum of the full amount in total. This method should allow you to pay in full for the product or service without overly straining your finances – you pay back what you can, as agreed upon when you begin the buy now pay later service.

Some popular buy now pay later services include Afterpay, Zip Pay, Brightepay, and some credit card networks such as  Mastercard and Visa, can offer buy now pay later arrangements.

Though it can be a convenient, immediate solution, it may be challenging to juggle the necessary repayments with other financial commitments. It’s not always the most appropriate method for people, and you should bear in mind your situation and ability in paying back the amounts. 

Before you sign up, keep in mind: 

  • It becomes easier to overspend with buy now pay later services, so know your limits on what you can and can’t afford.
  • You will be charged fees and costs to use the service, which can add up to a princely sum in and of itself.
  • Keeping track of your payments can be tricky if you’ve signed up for multiple services.
  • It could affect your loan applications for a car or mortgage as lenders consider buy now pay later spending just as much as your credit score.
  • Late repayments can appear on your credit report, which affects your ability to borrow money in the future.
  • Layby can be a cheaper alternative to buy now pay later, with no account-keeping or late fees to consider

If you are someone who could make use of BNPL services, you may wish to:

  • Ensure that when using the BNPL service, you stick to a set limit on what you spend so that you can comfortably pay it back later. 
  • Aim only to have one BNPL account at a time to manage payments through, rather than confuse yourself with multiple payments across different providers.
  • Always budget for bills, loan payments and BNPL payments, and 
  • Rather than use your credit card for payments to your BNPL account, consider linking to your debit account instead.

If you would like assistance in planning your financial future, help in managing your budget or some friendly advice, see us for a chat about what we can do for you.

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John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

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David and Alison Parker

I have been consulting J L Noller and Co. (more specifically Jane) for six years and during this time I have found her to be professional, efficient and easy to discuss all accounting and taxation matters with. Her office team are all polite and friendly also.

David and Alison Parker

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Carl Gillmore

I have used Jane & the team for the last 6 years for all of my business & personal accounting needs. They have always been professional, easy to talk to & available when we have needed assistance.

Carl Gillmore

Carl Gillmore Landscape

John Briggs

Jane Noller has been my accountant for the last 15 plus years. I can testify to Jane’s professionalism and expeditious manner in dealing with the day to day issues that surrounds our business accounting.

John Briggs

Registered Building Certifier