The UK government has set out proposals to tighten scrutiny on mergers and acquisitions, including small businesses in key tech areas.
The UK government wants to lower the limit that it can intervene in mergers and acquisitions that involve UK companies. Currently it can intervene in M&As of businesses who have a turnover of £70m, but it is looking to drop this to £1m or where the share of UK supply increases to 25% or over.
These changes are targeted at key areas, specifically companies that design or manufacture military and dual use products, and parts of the advanced technology sector.
The government is also consulting on longer-term proposals that will allow for better scrutiny of transactions that may raise national security concerns – this could include increasing risks of espionage, sabotage, or the ability to exert inappropriate leverage. The government asked for views on the changes it could make, including:
- introducing a ‘call-in’ power modelled on that in the Enterprise Act 2002 to allow government to scrutinise a broader range of transactions for national security concerns within a voluntary notification regime; and/or
- introducing a mandatory notification regime for foreign investment in certain parts of the economy which are critical for national security, such as the civil nuclear or the defence sector. Mandatory notification could also be required for foreign investment in key new projects or specific businesses or assets.
Business and Energy Secretary Greg Clark said: “Britain has and always has had a proud record of being open to the world as the foremost advocate of free trade. It is right that every so often the government reviews its mergers regime to close loopholes where they arise and this is what these proposals do in the area of national security.
“No part of the economy is off-limits to foreign investment and the UK will continue to be a vociferous advocate for free trade and a magnet for global talent.”
The Green Paper delivers on the commitment made in the Queen’s Speech to bring forward proposals to consolidate and strengthen Government’s powers to protect national security.
The consultation on lowering the turnover threshold from £70 million to £1 million will last four weeks. The consultation on longer-term reforms including the expanded version of the ‘call in’ power and mandatory notification regime will last twelve weeks.
A final package of reforms could include some or all of these options.