Australia has seen nearly $40 billion worth of large acquisition deals fail this year, marking the highest level in 15 years. This outcome has resulted from a combination of regulatory risks, valuation disagreements, and mounting challenges in advancing transactions within an increasingly stringent regulatory environment.

The decision by an ADNOC-led consortium to abandon its $18.7 billion acquisition offer for Santos, Australia's second-largest natural gas producer, represents the latest in a series of high-profile failed M&A transactions in Australia this year.

According to sources cited by Reuters last week, the acquisition offer launched by ADNOC through its investment vehicle XRG was shelved due to disagreements between the parties over potential capital gains tax liabilities related to certain Santos assets.

Analysts indicated that the deal would also likely have struggled to gain approval from Australia's Foreign Investment Review Board (FIRB). Including Santos' net debt, this offer would have become the largest all-cash acquisition bid in Australian history.

Data from London Stock Exchange Group (LSEG) shows that this transaction failure has pushed Australia's total value of failed M&A deals this year to the highest level since 2010, raising questions about the viability of large-scale transactions in Australia.

Advisors point out that M&A transactions in Australia must undergo multiple rounds of review by the Australian Competition and Consumer Commission (ACCC), the Foreign Investment Review Board, and other government agencies, creating lengthy approval processes that make advancing deals in Australia increasingly difficult.

Garen Cronin, Managing Director at boutique advisory firm Cadence Advisory, stated: "Public equity markets remain at historical highs, and both debt and equity financing are readily available, which should theoretically drive a robust wave of M&A activity."

However, he noted that multiple factors have contributed to a deteriorating M&A environment, including technological disruption impacting multiple industries and new ACCC regulations that took effect on January 1st this year, requiring most transactions to obtain regulatory approval before proceeding.

Cronin remarked: "Regulatory overreach, particularly from the ACCC, has created a maze of uncertainty. The mandatory approval process that the agency successfully pushed through implementation... has added substantial burden to M&A activity."

Under the previous rules, companies could voluntarily seek ACCC approval to reduce the risk of the agency intervening and taking enforcement action against transactions it deemed anti-competitive.

"More Pressure and Tension"

An ACCC spokesperson said the new mechanism "seeks to strike an appropriate balance between identifying and blocking anti-competitive acquisitions" while allowing transactions unlikely to raise competitive concerns to proceed with clarity.

The spokesperson stated: "This includes provisions for low-impact acquisitions to apply for exemptions, relieving companies of notification obligations after exemption."

However, advisors believe that longer regulatory processes and the time required for large deals to be finalized have increased the risk of transaction failures.

Lance Sacks, Corporate Practice Partner at Baker McKenzie, noted: "Time kills deals, and whether in private equity M&A or public market M&A, weakening momentum is undoubtedly a trend in the current M&A environment."

"Valuation gaps persist. While financing is readily available, transactions must make sense."

"Acquirers and corporate boards are conducting more thorough consideration, more detailed scrutiny, and exercising greater caution before taking action."

In August this year, Peabody Energy abandoned its $3.8 billion offer to acquire Anglo American's Queensland coal assets; in early 2025, Brookfield and Bain Capital also withdrew their $2.5 billion acquisition bid for Insignia Financial.

This Australian financial services group signed a $2.2 billion acquisition agreement with New York-based CC Capital in July this year.

David Eliakis, Head of M&A at King & Wood Mallesons, indicated that some acquirers considering participation in complex transactions are attempting to preemptively avoid potential future regulatory issues from the Foreign Investment Review Board, ACCC, or tax authorities.

"This results in parties having to face and discuss more thorny issues before formally signing acquisition documents, creating pressure and tension levels beyond normal circumstances, which in turn affects whether transactions can ultimately be completed."