Depending on your objectives, overseas entrants may decide to enter the Australian market by acquiring an existing business. Businesses may favour this approach where they can use an existing businesses’ infrastructure, employees and client base.
As with any acquisition, a key consideration will be whether you wish to take control of an existing company by purchasing shares representing a majority stake or whether you only want to purchase a select group of assets. There are advantages and disadvantages associated with each approach. The decision is often based on findings from due diligence investigations such as, taxation implications, government licences or authorities (which may be difficult to transfer in the case of an asset sale) and the extent of liabilities within the target company (which purchasers may not wish to take on by purchasing shares).
Foreign companies wishing to acquire an existing business may also require government approval under the Foreign Acquisitions and Takeovers Act 1975 (Cth). As a general rule foreign companies acquiring 20% or more of an Australian business valued more than $252 million will require prior approval. Higher thresholds apply to investors from certain countries (as a result of free trade agreements), and there are different thresholds and rules relating to foreign government investors and investment in land rich companies, agribusiness and ‘sensitive sectors’, such as telecommunications, transport, defence and media.