MHA | Major change in UK M&A laws

Major change in UK M&A laws

Posted on: January 20th 2022 · read

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New laws allowing the government to block the sale of UK companies, if it is felt there is a threat to national security, came into force in January, back dated to November 2020. 

The National Security & Investment Law is seen as one of the most far-reaching policies of its kind in the world.  The rules aim to address growing concerns about foreign ownership of certain UK companies.  Businesses and owners must now notify the government of sales involving companies which operate in any of 17 ‘sensitive’ sectors, including defence, transport and AI.  Once they have the reviewed the transaction, government officials can then choose to impose conditions on the terms of the deal or unwind it completely. 

Some business leaders have warned that the new legislation could reduce the appetite of overseas companies to invest in the UK, just at the same time as other government departments are trying to attract them.  There is no doubting that the enhanced scrutiny of deals and need to tick boxes will increase the paperwork and admin around UK M&A activity.  The government has emphasised that the vast majority of deals will proceed without delay but also cautioned that an open approach to investment must in the future be balanced with “measures to protect the safety of our citizens”.  

The new rules apply to transactions from November 2020 and hence some deals since then may come under scrutiny, including large takeovers of Arm and Ultra Electronics, both of which were targeted by US-owned purchasers.

What do you make of the new law?  Which of the 17 ‘sensitive’ sectors do you see being most affected?  Does the UK Government really have the resource and the appetite to enforce the new rules efficiently and effectively? 

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