Demystifying FIRB for PE houses

2 minute read + PDF download 28.08.2023 Alberto Colla, Kimberley Low

This report seeks to demystify Australia's foreign investment regime for domestic and foreign private equity firms. Australia’s foreign investment regime is relevant to both, given the broad scope of the regime.

Key takeouts

Many private equity firms fall within the scope of Australia's foreign investment regime – therefore, they need to understand how to effectively navigate it, as part of successfully structuring and executing their Australian deals

Although obtaining FIRB approval can sometimes be a protracted exercise, the good news is that the overwhelming majority of applications are approved - albeit increasingly subject to conditions to mitigate any national interest concerns

This report focuses on FIRB specifically through the lens of private equity investors, highlighting key practical considerations and top tips for them to keep front of mind to navigate Australia's foreign investment regime

Foreign investment in Australia has been accelerating, with foreign investors now accounting for 49% of investors today.

Foreign investment in Australia rose by over $430 billion to almost $4.6 trillion year on year, with private equity remaining the dominant asset class.

Alongside this growth, Australia's foreign investment regime has undergone significant developments in recent years, and further changes are afoot.

Navigating Australia’s foreign investment regime - critical to transactions succeeding

Given the increasingly broad reach and technical intricacies of the regime, it is critical – now more than ever - for both domestic and foreign private equity firms investing in Australia to effectively navigate the FIRB and other associated regulatory aspects of a PE transaction.

That's why we have published 'Demystifying FIRB for PE Houses', to cut through the mystique and complexity and to provide a helpful overview for private equity firms transacting in the Australian market. Although obtaining FIRB approval can sometimes be a protracted exercise, the good news is that the overwhelming majority of applications are approved - albeit increasingly subject to conditions to mitigate any national interest concerns.

This report focuses on FIRB specifically through the lens of private equity investors, highlighting key practical considerations and top tips for them to keep front of mind to navigate Australia's foreign investment regime.

Key topics covered in our report include:

Why PE funds are often characterised as 'Foreign Government Investors', and the implications of this;
FIRB's expectations around disclosure of a fund's investors in the approval application, and different approaches to managing the disclosure of what is invariably sensitive information;
Industry sectors that are attracting heightened scrutiny from FIRB;
Ways in which the FIRB approval process can be expedited and/or pre-empted to shorten the timeframe to closing a deal;
The interplay between FIRB, the Australian Competition and Consumer Commission and the Australian Taxation Office during the approval process, and how this can be managed proactively to reduce delays;
How target companies and vendors are increasingly seeking to allocate FIRB risks on deals;
Recent trends we are seeing in the types of conditions attached to FIRB approvals; and
Post-FIRB approval obligations which investors must continue to comply with, including the most recently introduced reporting requirements.