Stephen Kanavoutsos

10:02pm 16 May 2026 

The new merger regime represent yet another example of Australia’s growing problem of disincentives within its regulatory frameworks. Regulatory bodies must strike a delicate balance between enabling efficient markets and ensuring adequate oversight. Yet, despite Treasurer Jim Chalmers’ assertions that this legislation offers a ‘targeted’ response, it instead imposes an excessive burden on private investment and reflects a broader trend toward overregulation that risks stifling economic dynamism.

Public market investment is increasingly hampered by stringent compliance and governance requirements. Companies are discouraged from listing on the ASX due to the significant compliance costs associated with maintaining a public listing. These compliance costs can exceed a median annual cost of $7 million, discouraging smaller companies from entering the public market. Moreover, rules like the Continuous Disclosure obligation articulated in Listing Rule 3.1, while concise on the surface, come with a staggering 102-page guidance notice, illustrating the complexity and cost of compliance. Breaches, even if inadvertent, carry substantial penalties, creating a strong disincentive for companies to remain publicly listed.

As public markets become less appealing, the ASX continues to contract, depriving investors of investable public companies. Although the higher cost of capital at present might pose headwinds to private equity, large investors like superannuation funds are increasingly pivoting away from Australian public markets due to the dearth of opportunities. This trend is already causing concern, but the proposed legislation adds further pressure to the Australian investment landscape by threatening to expand excessive regulatory burdens into the private market.

A populist disincentive to investment

The sweeping powers the legislation confers reveal a populist-driven approach rather than a genuine effort to foster market efficiency. One of the most significant issues is the broad designation powers it grants the Minister. This power has already been flagged to apply to the supermarket sector, allowing the government to regulate acquisitions by necessitating approval for all deals in the industry. While not quite as radical as Kamala Harris’s similar rhetoric about ‘banning’ price gouging, this policy exposes the prioritisation of political appeal over economic reasoning.

Of great concern is the intention to apply the designation powers to cover any company with global turnover exceeding $200 million that seeks to invest in private, unlisted companies. Such transactions would need Australian Competition and Consumer Commission (ACCC) approval for any acquisition of a 20% or greater stake. This would effectively force mandatory notification for a significant portion of private equity deals, adding a substantial regulatory burden on transactions, regardless of their competitive impact.

The ACCC is no longer an enabler, but a barrier

The ACCC, charged with promoting the proper functioning of markets by regulating anti-competitive conduct, has now been repositioned as a gatekeeper for M&A activity under this proposal. By imposing a mandatory review of all acquisitions, irrespective of their effect on competition, the ACCC risks becoming an obstacle for transactions, rather than an enabler of market efficiency. This will lead to longer review periods, higher compliance costs, and a chilling effect on deal-making activity in Australia. Chalmers has emphasised the importance of mergers for attracting capital, yet the broad powers he has conferred upon the ACCC will likely have the opposite effect, deterring the very investment he claims to encourage.

Instead of encouraging a thriving M&A landscape, the legislation’s broad designation powers and heavy-handed regulatory approach may create a bottleneck that stifles private markets. The potential consequences are far-reaching: not only could Australia see a reduction in domestic and international investment, but the limitations placed on the private sector’s ability to innovate and expand could also significantly curb the nation’s economic growth at a time when Australia can least afford it.

As public markets continue to struggle under mounting compliance obligations, the introduction of new barriers to private market transactions could further stifle investment. The layering of unnecessary regulatory burdens on private transactions risks alienating a vital source of capital, driving private equity investment and activity offshore.

While the new merger laws have been ostensibly introduced to safeguard competition, they risk tipping the scales too far toward overregulation. By doing so, Australia may find itself strangling private capital flows, limiting the scope for innovation and enterprise that are critical for long-term economic vitality. In a global economy where competition for capital is fierce, Australia cannot afford to be left behind due to self-imposed regulatory excesses.