Fiscal year 2026—which in Australia runs from July 1, 2025, to June 30, 2026—saw subdued M&A activity in Australia and New Zealand. Total announced deal value sank by one-third from fiscal year 2025 to its lowest level in the past ten years. (See Exhibit 1.) The regional market was even more lackluster relative to global dealmaking, which rose by 45% over the same period. Despite some bright spots, the region faces ongoing challenges that may keep activity muted for the near term.
The most notable feature of the 2026 decline was the absence of large deals, a reversal from a historical trend. Over the previous five years, major strategic M&A moves dramatically impacted the market, reducing the number of large Australian-listed domestic companies through consolidation, take-private transactions, and acquisition by foreign-listed entities. In 2021, Santos Energy acquired Oil Search, consolidating the second- and third-largest energy players on the Australian Stock Exchange (ASX). In 2022, Block, a global point-of-sale technology provider, acquired Afterpay, a buy-now-pay later firm that was Australia’s largest listed technology company. A year later, Newmont, a US-listed gold miner, acquired Newcrest, creating the largest gold-mining company in the world.
A second notable feature was a shift in the origin of acquiring companies. Inbound transactions, historically a large source of deals, reached their lowest level since 2017. Instead, nearly two-thirds of acquisitions were consolidations of domestic companies by other domestic companies.
The transactions that closed in 2026 were dominated by deals related to materials, energy, and real estate. (See Exhibit 2.) The biggest transaction was the sale of one of Australia’s largest electricity generators from one foreign owner to another. Real estate deals included the privatization of a medium-size real estate investment trust (REIT) and several asset-recycling property transactions between REIT owners. The largest deal in New Zealand was the sale of a consumer dairy business to a global, family-owned conglomerate.
Four Forces Driving Reduced Deal Volumes
Four forces combined to drive down transaction volumes in the region in 2026: a changing Australian regulatory landscape, the growing influence of superannuation funds, global instability, and a mismatch in the expectations of sellers and buyers.
Regulations Are Extending Deal Timelines and Hampering Deal Completion
Australia’s new mandatory merger control framework, which took effect on January 1, 2026, represents the most significant change to Australian merger law in decades. The framework requires dealmakers to notify the Competition and Consumer Commission of any deal in which the combined revenue of the merged entities exceeds $200 million in Australian dollars. Under the new rules, parties must wait for commission clearance before they can proceed. To further complicate dealmaking, Australia’s Foreign Investment Review Board has stepped up its inspection of assets that have national security implications and is tightening its requirements to provide greater assurance about data security, especially in instances involving foreign storage of Australian consumer data. One example of the impact of these factors is that the largest proposed deal of the last two years was withdrawn, in part due to concerns about the prospect that it might not receive regulatory approval.
These developments are increasing the length of the M&A review process and reducing the probability of deal approval, both of which make transactions costlier and more difficult to execute. For large acquirers, these disadvantages can significantly undercut the benefits of a deal and can introduce a host of risks, including customer and employee attrition and difficulty in realizing deal synergies. For smaller companies, higher fixed costs force some buyers to try to group transactions into larger deals, which limits small, one-off transactions.
Superannuation Funds Are Growing in Influence and Are Critical to Deal Approval in Many Cases
Australia’s defined contribution superannuation system continues to grow. Employers generally must contribute 12% of employee salaries, up to a cap, to individual superannuation accounts. This mandate has created an asset base of greater than $4 trillion (in Australian dollars)—greater than that of the entire listed stock exchange. (See Exhibit 3.) In addition, superannuation funds own an estimated 36% of the ASX’s market cap.
The listed market is failing to keep pace with the superannuation asset pool and with growth in other global markets, for three reasons. First, over the past decade, inbound deals have outpaced outbound deals by 2.4 to 1, contributing to the removal of companies and investable assets from the ASX and from New Zealand’s NZX. Second, the low relative volume of domestic IPOs translates into limited new, large names in the market. Third, domestic companies in media, packaging, and materials have moved their listings to other markets.
Against this backdrop, some superannuation investors have a bias toward maintaining local listings and have voted against inbound proposals in the face of positive board recommendations, causing prospective acquirers to withdraw from significant deals. Since the share of the market controlled by superannuation funds is likely to continue to grow, this headwind will remain strong.
Global Instability and Macro Headwinds Have Reduced Growth Expectations
Various global and local macroeconomic complications have combined to reduce investors’ expectations for growth in Australia and New Zealand. The initial impact of US tariffs on global trade and inflation, together with a slowing of domestic housing markets, has led to substantially downgraded economic growth forecasts: the IMF reduced its 2025 GDP forecasts from 2.1% to 1.8% in Australia and from 1.9% to 0.8% in New Zealand.
At the same time, inflation fears, exacerbated by heightened tensions in the Strait of Hormuz, have resulted in higher interest rates, up over 2% since 2022. The impact of higher rates on investor sentiment is twofold. First, they increase downward pressure on growth in the domestic market. Second, they limit the benefit of leverage as a catalyst for acquisitions. This is particularly important in the case of cash-funded transactions, which account for 13 of the 20 largest deals in Australia and New Zealand in the past five years.
Valuation Gaps Persist Between Buyers and Sellers
Reduced growth and higher capital costs are lowering buyers’ valuation expectations. But market soundings suggest that sellers have not lowered their sale price expectations commensurately. In addition, the prevailing environment of higher interest rates means that companies that have existing loans at low rates would have to finance at higher rates on sale. This creates a valuation gap, especially for leveraged buyers. While these gaps persist, many private owners of assets, in particular, are opting to wait for improved market conditions, resulting in longer effective hold times and fewer private market transactions.
Forces Supporting Deal Growth
Despite the country’s low total transaction volume, Australia continues to attract significant attention as a strategic supplier to global energy supply. Recent events in the Middle East, including the conflict around the Strait of Hormuz and the attack on Qatar’s Ras Laffan liquefied natural gas (LNG) complex, have highlighted Australia’s critical role as a top supplier of LNG to partners in the greater Asia-Pacific region. As a result, inbound interest in existing Australian LNG suppliers and emerging Australian gas basins (including the Beetaloo in the Northern Territory) is growing.
In addition, ongoing investment in the energy transition continues to attract investors, leading to acquisitions of integrated generation and retailing companies, such as Sembcorp’s purchase of Alinta, the largest deal in Australia so far this year. There have also been substantial investments in transmission and distribution companies, including Brookfield’s acquisition of Ausnet. Finally, the growing need for critical minerals—including copper, lithium, and rare earths—is attracting livelier interest from global strategic buyers.
Another positive influence on M&A activity, at least in the short term, is likely to be the Treasury Laws Amendment (Tax Reform No. 1) Act 2026, which sets a timetable for eliminating the 50% discount currently received on capital gains by individuals and trusts. As a result, business owners that are considering a sale may try to close the transaction before the reform kicks in on July 1, 2027, boosting the array of vendor-led deals available for private equity buyers.
Time for a Targeted, Disciplined Approach
The transaction market in Australia and New Zealand is likely to continue to be challenged as it heads into 2027. The BCG M&A Sentiment Index for Asia-Pacific sits at 51 as of this writing, which is near its historical low and well below the overall mark of 83 for our global index. Nevertheless, patient and selective acquirers will continue to have opportunities to execute strategic deals in essential industries, including energy, critical minerals, food supply, and niche technological and health sectors. Our research has found that well-executed M&A is a core pillar for Australia’s best value creators. The search for differentiated deals will continue to provide opportunities, both domestically and abroad.
Our advice for the current difficult market includes taking the following strategic actions:
- Continue to pursue targeted, rather than opportunistic M&A. Ensure that deals are strategically aligned, value enhancing, and well executed. We observe that many of the best deals come from motivated sellers. Changes in the regulatory regime governing capital gains and continuing global instability could create the conditions for an increase in opportunities for seller-led transactions.
- Turn extended approval timelines to your advantage. Immediately realizing the full benefits of a deal requires developing meaningful and thoughtful preclosing plans. Such plans accelerate the realization of benefits and avoid or minimize operational risks. Extended approval timelines can turn into an advantage when treated as an opportunity to conduct extensive precompletion planning with dedicated clean teams, thereby ensuring sustained momentum from expected changes so that the acquirer can bank deal benefits from day one.
- Structure deals with regulatory approval in mind. Increased regulatory focus on market structures and foreign control is likely to require some divestment in order for certain deals to gain approval. Recent examples include divestments ranging from 8% to over 20% of total assets. Explicit consideration of this likelihood during valuation assessment and planning is essential. In many cases, dealmakers can complete divestment activity with negligible loss of strategic benefit or financial value.
- Target smaller cornerstone positions. Many of the best long-term deals will involve small but rapidly growing industries, such as critical minerals. Minority equity shares or strategic joint ventures in emerging industries, commodities, or resource basins can position a company for larger-scale deals in the future.
The M&A market in Australia and New Zealand is a challenging but rewarding one for savvy dealmakers. The best way to succeed in it is to take a long-term view and adopt a more targeted and disciplined approach as the cycle evolves.
The authors would like to acknowledge Angus Kennedy for his contributions to the development of this article.
