The new Federal Government rules will disproportionately affect the middle market, potentially strengthening big business.
The rewriting of the merger rules will impact the exit options of private mid-sized businesses that have often been built from the ground up by family entrepreneurs.
Under the new rules, the Australian Competition and Consumer Commission will oversee planned mergers and takeovers, with involvement triggered by transactions worth over $35 million.
Middle market dealmaking encompasses deals between $10 million to $250 million.
That puts the onus on middle market business owners to demonstrate that a sale will not substantially lessen competition, creating what some see as an unfair burden.
It will discourage mid-sized business leaders to grow their business and will add extra red tape and cost to make it more difficult to complete a transaction.
Why are these rules being changed?
While the aim is to prevent anti-competitive deals, critics argue that the main beneficiaries will be larger corporations, rather than fostering a more competitive landscape.
These changes will impact entrepreneurship, the very element that creates competition and innovation in the first place.
Limiting exit options for middle market business owners may well deter people from starting businesses in the first place.
And the cost of acquiring a peer becomes a significant burden for mid-sized buyers (in the form of new administration fees payable to ACCC), making it hard for them to compete with the deep-pocketed top end of town.
The proposed rules add new cost and regulatory uncertainty that will likely deter M&A in the future.
These changes will disrupt succession plans and, in some cases, render successful businesses unsellable. That would pose significant challenges for the families who have invested significant effort over the years.
If fewer people decide to go into business, the effect will be concentrating power with big businesses, not reducing their influence.
That will undermine the ultimate goal of fostering healthy competition.
