The Australian government’s decision to block the A$672 million takeover of Mayne Pharma by US-based Cosette Pharmaceuticals is reverberating through the country’s mergers and acquisitions landscape — with lawyers predicting a shift toward tougher deal terms for foreign bidders.

The move, based on national-interest grounds, has prompted advice that future deals could include significantly larger “reverse break fees” and stricter regulatory-approval benchmarks to guard against similar failures.

On 20 February 2025, Cosette and Mayne Pharma executed a Scheme Implementation Deed under which Cosette offered A$7.40 per share for all outstanding Mayne stock.

The terms included a so-called “material adverse change” (MAC) clause.

However, in May Cosette attempted to terminate the agreement citing a downturn in Mayne’s financial performance.

After months of litigation, the New South Wales Supreme Court ruled in October that Cosette had not met the high evidentiary threshold required to claim a MAC, and that the termination was therefore invalid — effectively reaffirming the takeover agreement.

Despite that legal victory for Mayne, the acquisition still required approval from the Foreign Investment Review Board (FIRB).

On 19 November 2025 the government blocked the takeover after Cosette disclosed plans to dispose of or close Mayne’s key manufacturing site near Adelaide — a facility that supplies critical medicines and employs around 200 workers.

The Treasurer determined that no conditions could sufficiently mitigate risks to Australia’s medicine-supply chain and domestic manufacturing capacity.

In response, M&A lawyers have signalled that boards of Australian companies are likely to demand higher reverse break fees — penalties paid by bidders who withdraw from a transaction — and insist on firm regulatory approval before completing deals.

In Australia, break fees are typically small (around one percent of the deal’s equity value) and paid by the target if the deal collapses.

By contrast, reverse break fees, common in US transactions, often range between three and four percent of the transaction value.

One senior partner at global law-firm HSF Kramer argued that the Mayne case will accelerate debate around embedding reverse break fees into foreign bids — not only for material breaches, but also if approval is withheld.

Another adviser suggested foreign-bid deals may include binding commitments that bidders will not alter their stated intentions regarding business operations, such as site closures, without consent.

The rejected takeover may tighten conditions for foreign investment going forward.

Still, despite increased caution, the broader market remains receptive: data shows that in 2025 announced M&A deals in Australia reached nearly US$81 billion, with foreign bidders accounting for around US$35 billion — the highest inbound share in four years.

The implication is that while inbound capital remains strong, the bar for regulatory compliance and structural safeguards is rising.

For cross-border deals, the Mayne saga stands as a stark warning: foreign bidders may now need to offer more than just cash for equity — they may need to commit to regulatory certainty, transparent operations and potentially face heavier financial penalties if the deal falls through.