At a glance
The convergence of Australia’s new mandatory ACCC merger control regime (operative from 1 January 2026), an increasingly assertive FIRB, and the high-profile collapse of the Cosette/Mayne Pharma transaction (read our previous article on this transaction) has fundamentally altered the regulatory risk landscape for Australian M&A. This article argues that the existing contractual toolkit – MAC clauses, best endeavours/reasonable endeavours obligations, reverse break fees and long-stop dates – is no longer adequate to address the multi-layered regulatory risk that now characterises Australian deals. Drawing on the lessons of Mayne Pharma and the structural changes introduced by the new merger regime, the article proposes a reconceptualised framework for regulatory risk allocation in scheme implementation deeds (SID), implementation agreements and sale documentation that reflects the current regulatory environment.
The new regulatory reality
Australia’s M&A market has entered a new era in which regulatory risk is no longer a background condition of dealmaking – it is a central, deal-defining variable, with bidders and target boards increasingly needing to structure transactions around approval conditions precedent, extended long-stop dates and allocation of regulatory risk.
Three regulatory forces have converged simultaneously: the new ACCC mandatory merger control regime, a more assertive FIRB, and an increasingly active Takeovers Panel.
- The Cosette/Mayne Pharma transaction, spanning a MAC dispute before the NSW Supreme Court, Takeovers Panel proceedings and ultimately a FIRB block, is the perfect lens through which to examine how existing deal protections performed, and where they fell short.
- The article’s purpose: to propose a more sophisticated and fit-for-purpose approach to regulatory risk allocation in Australian M&A documentation going forward.
The Mayne Pharma saga: A case study in regulatory risk
The deal and its considerations
On 20 February 2025, Mayne Pharma entered into a SID with Cosette under which Cosette agreed to acquire all Mayne Pharma shares for A$7.40 per share by way of scheme of arrangement, subject to conditions including that no MAC had occurred and that Cosette received FIRB approval. A typical market standard “best endeavours” FIRB obligation was drafted in the SID.
The MAC dispute
On 15 October 2025, the NSW Supreme Court found that Cosette did not validly terminate its $672 million takeover of Mayne Pharma off the back of the no MAC clause being triggered. Justice Black found in favour of Mayne Pharma, clarifying key principles around MAC clauses, forecast disclaimers and termination rights, confirming that proving a MAC has occurred requires a high evidentiary threshold, and that missed forecasts alone are insufficient where disclaimers exist.
Strategic use of FIRB
On 24 June 2025, Cosette communicated to FIRB that it had re-evaluated its intentions concerning Mayne Pharma’s business in Australia and determined that its current intention was to seek to dispose of or close the Salisbury Site, despite representations made in the scheme booklet to the contrary. It was extremely rare for a bidder to change their investment thesis so late in a deal, and the timing of the change of heart, just one month after the scheme booklet was published, certainly raised questions.
Mayne suggested that Cosette was trying to amplify the risk of job losses and reduced manufacturing capability in Australia to cause the FIRB approval condition to fail, having exhausted other avenues to avoid completing the transaction.
The Takeovers Panel’s response
The Panel made orders that Cosette must agree to any conditions reasonably required by the Treasurer in connection with the Salisbury Site, including conditions reasonably restraining its closure, that were not inconsistent with Cosette’s prior intentions disclosure in the scheme booklet.
The FIRB block
On 21 November 2025, Treasurer Jim Chalmers accepted FIRB’s recommendation to block Cosette’s takeover of Mayne, finding unresolvable national-interest risks, stating that no conditions could be put in place to adequately mitigate national interest risks, particularly unique risks to the supply of critical medicines.
Interestingly, even though the Takeovers Panel ordered Cosette to accept reasonable FIRB conditions, the Treasurer ultimately found no conditions could work highlighting a structural tension between Panel orders and FIRB outcomes that the existing contractual framework could not adequately address.
The new ACCC merger control regime: A second layer of regulatory risk
The structural shift
From 1 January 2026, notifiable acquisitions put into effect without ACCC clearance will be automatically void under Australian law and create penalty risk for merger parties. This is a profound change, deals that previously could close and be challenged post-facto are now suspended pending approval, and an inadvertent failure to notify creates serious legal consequences.
The new regime tends to shift more regulatory risk onto sellers. This shift arises because of the need for more deals to be conditional upon ACCC clearance, and because the ACCC is no longer able to review multiple shortlisted bidders or provide confidential clearance. Consequently, buyers and sellers need to proceed committing to a deal with no or limited substantive engagement with the ACCC, unlike FIRB where approval can be sought by a potential acquirer ahead of signing binding transaction documents.
Combined effect of FIRB and ACCC
For cross-border deals in sensitive sectors, parties now face sequential and potentially conflicting regulatory processes, ACCC clearance followed by FIRB approval, with different decision-makers, different standards, different timelines, different fee regimes and different remedies. Neither process gives any certainty about the other. The combined timeline risk is genuinely new and potentially not as well addressed as market practice is still evolving to deal with the new regime.
The existing contractual toolkit: Where it works and where it fails
“Endeavours obligation”
The risk allocation spectrum can range from an absolute commitment to close through to good faith cooperation, with several possibilities in between. By comparison to the US market, an absolute commitment to complete is not as commonplace in Australian M&A.
Mayne Pharma and Cossette transaction exposed a critical gap: existing SIDs typically oblige bidders to use ‘best endeavours’ to obtain FIRB approval, but do not contain express covenants preventing a bidder from changing its stated intentions in ways that foreseeably undermine the prospects of securing that approval. What was missing was a restraint on Cosette from going back on its representations in the scheme booklet about its plans for the future operations of Mayne following the acquisition.
Reverse break fees
Following the failed Mayne Pharma transaction, lawyers indicated that foreign bidders for Australian companies could be liable for higher reverse break fees if regulatory approval is not received. The current market practice on reverse break fees tends to be typically 1% of deal value for regulatory failure. Whether this remains appropriate given the increased regulatory risk profile for sellers is the question. Query whether a reverse break fee should be the exclusive remedy and whether damages should also remain available?
MAC clauses
The Mayne Pharma decision confirmed there is a high bar for MAC claims in Australia. But there is an underexplored interaction between MAC clauses and regulatory delay, if a transaction is suspended for 6–12 months pending ACCC or FIRB review, the underlying business may genuinely deteriorate. Parties should carefully consider how MAC clauses should be drafted to deal with regulatory delay-induced deterioration while preserving the target’s ability to enforce the deal?
Long stop date
In the Mayne/Cosette SID the end date for the scheme was hard-wired as 20 November 2025. When the dispute arose in May 2025, it would have looked like there was plenty of time for the matter to be decided by the Court, yet it still took the best part of 4 months to resolve, leaving just over a month before the end date after the decision was handed down
With both ACCC and FIRB timelines now extending into 6–12 month territory for complex deals, parties should consider how long-stop dates should be set, and what extension mechanisms – automatic, mutual and unilateral – should be included.
A reconceptualised framework for regulatory risk allocation
Regulatory due diligence as discipline
Regulatory risk assessment needs to become a formal, documented pre-signing discipline, not just a competition law assessment but a holistic mapping of ACCC notification requirements, FIRB sensitivity, national security touchpoints and political risk. The Mayne Pharma transaction failed in part because FIRB risk was underweighted at the structuring stage.
Locking in bidder intentions
Consideration should be had as to whether SIDs should contain an express covenant by the bidder not to make representations to regulatory bodies (ACCC, FIRB, or any other regulator) that are materially inconsistent with representations made in the scheme booklet or bidder’s statement, with breach giving rise to specific enforcement rights and/or an automatic reverse break fee trigger. This would directly address the Mayne Pharma gap.
Recalibrating the Endeavours Spectrum
Consideration should be given to a tiered endeavours framework tied to the regulatory sensitivity of the transaction:
- For transactions with low FIRB/ACCC risk: standard “best endeavours” remains appropriate.
- For transactions in sensitive sectors: a strengthened “best endeavours” with prescribed minimum conduct obligations.
- For transactions where regulatory approval is genuinely binary and material: an absolute commitment to close limited only to regulatory risk (not commercial risk), with a reverse break fee as the exclusive remedy for failure to close due to regulatory block.
Reverse break fee reform
Query whether a two-tier reverse break fee structure should be adopted with a lower fee triggered by the bidder’s failure to use the required endeavours standard, and a higher fee triggered where regulatory approval fails due to a change in the bidder’s stated intentions. In addition, a higher fee should not be the exclusive remedy in cases of deliberate regulatory manipulation.
Revisit the traditional long stop date
We would suggest thought be given to a rolling long stop date which could involve an initial long-stop date set at a realistic baseline (e.g. 9 months post-signing). Automatic extension provisions triggered by ACCC or FIRB review periods with prescribed extension increments. A unilateral target termination right after a maximum long-stop date (e.g. 18 months) regardless of the status of regulatory proceedings. More controversial would be a mechanism payable by the bidder for each month of extension beyond the initial long-stop date where failure to satisfy a regulatory CP is due to the bidder’s actions or inactions, and to further incentivise regulatory diligence and compensate the target for the costs of prolonged limbo.
The Interaction with the Takeovers Panel
Note that the Panel’s orders in Mayne Pharma, requiring Cosette to accept FIRB conditions consistent with its stated intentions, represent an important precedent. Parties to schemes should consider whether Panel orders of this type could serve as a mechanism to enforce bidder conduct covenants, and design their SID provisions accordingly to maximise enforceability.
Key takeaways
The regulatory landscape has shifted materially and permanently. The existing contractual toolkit designed for a voluntary, informal competition regime and a relatively predictable FIRB process is showing its age. The Mayne Pharma transaction was not an aberration; it was a preview of the deal disputes that will increasingly characterise Australian M&A as regulatory timelines lengthen, national interest considerations become more politicised and bidders face rising commercial pressure between signing and closing.
The Mayne Pharma transaction exposed a structural deficiency in Australian public M&A that goes beyond any individual drafting weakness. The existing deal protection architecture assumes that contractual rights under the SID are the primary enforcement mechanism for bidder conduct between signing and closing. Mayne Pharma demonstrated that this assumption is fundamentally incorrect. In practice, bidder conduct during the regulatory approval process is subject to three parallel and imperfectly coordinated enforcement regimes – contractual, Panel-based and regulatory – none of which, individually or collectively, proved capable of delivering the deal to completion once the bidder chose to pursue a strategy of regulatory disengagement.
SIDs, implementation agreements and related sale documents require careful consideration around regulatory risk, not merely updated at the margins and lawyers will have a critical role in assisting their clients in navigating these matters and mitigating against the risk of coordination failure between the three regimes.
For further information, please reach out to Natalie Kurdian from our Corporate Advisory team.