The UK’s New Merger Controls: Protecting National Security or Adding Uncertainty for Investors?

The new law will give the UK government the power to:

• Stop, regulate and even undo any acquisition of any UK-based businesses or assets
• Require advanced notice and approval of all deals in 17 “sensitive” sectors

The law will:

• Allow the Secretary of State (SoS) to assess whether, and act if, a deal is a national security risk
• Require buyers in the sensitive sectors to seek approval
• Require notice for an increase in shareholding beyond 15%
• Encourage voluntary notice in other sectors
• Impose remarkable financial and criminal sanctions for non-compliance

Mandatory Disclosure Defined for Some Sectors

The sensitive sectors in which notice is mandatory are widely defined. They include advanced materials and robotics, AI, nuclear, communications, computer hardware, critical supplies to government, cryptographic authentication, data infrastructure, defence, energy, engineering biology, military, quantum satellite and space technologies, and transport, explain the advisers from Moore Barlow LLP, a member of ECOVIS International.

The new regime also applies to any assignment or licence of an asset (e.g., intellectual property, technology, or information) and any dealing with potentially strategic land. It applies wherever the asset is located, so long as it is used in an activity in the UK or to supply goods or services in the UK.

The test is whether the SoS is satisfied that they could pose a national security risk. There is no clear definition yet of what that means. If thought to pose such a risk, the SoS can stop or undo the deal or impose any conditions. For example, the SoS could order changes to the deal terms, or how the target operates.

Any Unauthorised Transaction Could Result in Fines

Where the mandatory notice regime applies and a transaction is completed before it is cleared, the transaction will be void and the parties can be subject to fines of up to the higher of 5% of worldwide turnover and GBP 10 million. Individuals may also be imprisoned for up to five years. Other penalties also apply for non-compliance with aspects of the review process.

For further information please contact:
Mark Lucas, Partner, Moore Barlow LLP – Member of ECOVIS International, Guildford, Surrey, UK
Email: mark.lucas@moorebarlow.com