Explained: How takeovers work on the ASX

Takeover bids can send share prices soaring overnight. Here’s how one company buys another on the ASX, the difference between a takeover bid and a scheme of arrangement, and what it means for shareholders.

A takeover happens when one company, private equity firm or investor buys control of another company. On the ASX, that usually means buying enough of its shares to own it outright.

Takeovers can be friendly, where the target company’s board recommends the offer to shareholders, or hostile, where the board opposes it.

The premium

To persuade shareholders to sell, bidders usually offer a premium, a price above where the shares were trading before the offer. Premiums of 30% or more are common.

That’s why a target company’s share price often jumps when a bid is announced, usually to just below the offer price.

How deals are done

There are two main ways to buy an ASX-listed company.

A takeover bid is an offer made directly to all shareholders to buy their shares. If the bidder gets to 90% of the shares, it can compulsorily acquire the rest.

A scheme of arrangement is the most common method for friendly deals. The target company proposes the deal to its own shareholders, who vote on it. It needs approval from 75% of the votes cast, and from a majority of shareholders who vote, as well as approval from a court. If approved, it binds all shareholders.

Before agreeing to a deal, the target company often grants the bidder a period of exclusive due diligence, letting it examine the business’s finances.

The target’s board usually commissions an independent expert to report on whether the offer is fair and reasonable.

Regulators

Takeovers are regulated by ASIC and the Takeovers Panel, which can rule on disputes and unacceptable conduct.

Large deals that could reduce competition need the approval of the Australian Competition and Consumer Commission. Under new laws, from January 2026 deals above certain thresholds must be notified to the ACCC before they go ahead.

Foreign buyers often need approval from the Treasurer, on advice from the Foreign Investment Review Board, which considers whether a deal is in the national interest.

What shareholders should consider

Shareholders who receive a takeover offer can usually accept, reject, or sell their shares on the market.

Things to consider include whether the price reflects the company’s long-term value, whether a rival bidder might offer more, the tax consequences of selling, and whether the deal is likely to be approved by regulators.

Sometimes deals fall over, and the target’s share price falls back, which is a risk for investors who buy after a bid is announced.