New legislation on M&A activity in the UK

The National Security and Investment Act aims to protect the national security interest and is ambitious and complicated.

The Act allows the UK Government to scrutinise and intervene in certain acquisitions made by anyone. The intervention is on national security grounds in one of 17 areas of the economy where the Government perceive a potential risk and subject to certain criteria it is a legal requirement to inform the government of any impending acquisition. The legislation also covers purely domestic acquisitions.

Failure to get approval in one of these defined market areas results in the transaction being void and may mean civil and criminal penalties.

With record levels of M&A in the UK continuing this legislation will have an effect on timing and processes for a number of transactions, corporate restructuring or investment in entities in the defined sectors as approval for the transaction is required before it can complete. And in most cases there is no de minimus level on notifiable transactions.

The 17 sectors of the economy are wide enough to ensure, at least initially, a large number of transactions may be caught.
The sectors are - advanced materials, advanced robotics, AI, civil nuclear communications, computing hardware, critical suppliers to Government, cryptographic authentication, data infrastructure, defence, energy, military and dual-use, quantum technologies, satellite and space technologies, suppliers to the emergency services, synthetic biology and transport.
As legislation is new most practitioners and corporates acting in the defined areas will be go for clearance - at least in early settling in period of the legislation. The legislation is a broadly drafted with the aim to filter rapidly down to those transactions with a pure national security focus.
Whilst history has shown that the likelihood of a Government intervention is low the consequences of getting it wrong outweigh the cost/delays of failing to properly comply with the approval provisions. The legislation is new and care is needed to make sure it isn’t overlooked.

The next steps

For more information, please contact Andrew Millington or your usual UHY adviser.

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