ASIC's Corporate Insolvency Update, Issue 36, recorded 13,413 companiesentering external administration in the 2024-25 financial year to 31 May 2025,up 34.2% on the prior corresponding period, with voluntary administrations comprising 10.5% of appointments. Insolvency firm McGrathNicol recorded a further 9% rise in appointments across 2025 with distress to remaining elevated in 2026. A proportion of those companies operate viable businesses carrying unsustainable balance sheets, and they become acquisition opportunities for buyers able to transact inside insolvency timeframes.

Administrators operate under a statutory timetable that compresses any sale process into weeks, and that timetable, combined with the administrator'sduty to creditors and the personal exposure attaching to the role, produces a seller that weights certainty and speed heavily against price. An offer with committed funding, evidence of funds and minimal conditionality will frequentlybe preferred over a higher offer conditional on financier approval, because asale that fails midway through an administration erodes the business value the process exists to preserve and exposes the administrator to trading losses.

An asset sale, the first of the two structures used in thesetransactions, transfers the business and assets from the administrator free of most historical liabilities, generally without warranties, which places the full diligence risk on the buyer. A deed of company arrangement (DOCA) recapitalises and delivers the corporate entity itself, preserving contracts, licences, registrations and accreditations that would not survive a transfer, and binding unsecured creditors to a compromise once passed by the statutory majorities at the second creditors' meeting. Where the value of a business sits in entity-level rights, an asset purchase leaks that value and a DOCA does not.

Diligence in an administration proceeds on incomplete information, sincerecords are frequently disordered, management may have departed, and warranties are unavailable, so the practical method is to verify the facts that carry the value and price the remainder. Employee entitlements and their treatment undereach structure, the contracts and licences the business depends on, landlord positions and lease assignment requirements, and the status of secured creditors and any competing enforcement action are the recurring items that determine post-completion outcomes.

Two regulatory processes require attention at the outset of a transaction rather than towards completion. Foreign investment approval can be a significant source of delay in distressed M&A, making it essential to establish early and accurately document the target business's activities, as regulatory sensitivities are not always obvious from the nature of its operations. In addition, Australia's mandatory and suspensory merger control regime, which commenced on 1 January 2026, prohibits completion of notifiable acquisitions without ACCC approval or a waiver. While exemptions may apply to acquisitions undertaken through external administration, their availability depends on the specific circumstances of the transaction and should be confirmed with legal counsel rather than assumed.

Funding arrangements decide competitive processes in the distressed acquisition market more often than valuation does, and buyers who have arranged committed facilities before the opportunity arises, who can evidence funds on request, and who can settle a deposit quickly without a financing condition are able to bid on terms administrators can accept. Buyers arranging finance after selection are frequently unable to meet the timetable, and administrators who have experienced a failed sale apply that experience to subsequent processes.

The practical consequence is that distressed acquisition capabilityfunctions as a standing capability rather than a transaction-specific one. Established funding relationships, a defined diligence method, and clear parameters on what the buyer will and will not acquire. How any particular acquisition should be structured, and what approvals it requires, is a matter for the buyer's own legal and financial advisers.

Sources

  • ASIC,Corporate Insolvency Update Issue 36 (2025):https://www.asic.gov.au/about-asic/corporate-publications/newsletters/asic-corporate-insolvency-update/asic-corporate-insolvency-update-issue-36/
  • McGrathNicol,Forecast 2026, Insolvency:https://www.mcgrathnicol.com/insight/forecast-2026/insolvency/
  • A&OShearman, Australian restructuring outlook 2026:https://www.aoshearman.com/en/insights/global-restructuring-outlook/refinancings-and-high-energy-costs-set-to-drive-australian-restructurings-in-the-year-ahead
  • Norton RoseFulbright, Australia's new mandatory merger control regime:https://www.nortonrosefulbright.com/en-au/knowledge/publications/06692609/australias-new-mandatory-merger-control-regime
  •  ACCC,Merger control regime:https://www.accc.gov.au/business/mergers-and-acquisitions/merger-control-regime