United Kingdom Says it Will Now Examine M&A Deals
United Kingdom Prime Minister Boris Johnson recently announced that the government will vet M&A deals in the tech sector (and other areas) to make certain no unwelcome threats sneak into the United Kingdom’s fragile economy.
National Security and Investment Bill
Johnson’s administration is introducing the National Security and Investment Bill. The legislation says its aim is to “strengthen the ability of the United Kingdom ability to investigate and intervene in mergers, acquisitions and other types of deals that could threaten our national security,” including deals related to the telecoms, IT and AI sectors.
A factsheet accompanying the bill states, “[s]creening investments is an important part of the work the government does to protect security. The overwhelming majority of investments raise no national security concerns.”
However, the bill says, that “[u]nder the National Security and Investment Bill, the government will be taking a targeted, proportionate approach to ensure it can scrutinise, impose conditions on or, as a last resort, block a deal in any sector where there is an unacceptable risk to national security.”
National Security Threatened by Hostile Actors
The United Kingdom and its businesses face continued and broad-ranging hostile activity. The government seeks to detect those who compromise their national security and that of our allies. Such behaviour left unchecked can cause vulnerability to disruption, unfair leverage, and espionage. Per the bill, the government must be able to fully combat these threats coming from ever more determined overseas actors.
What constitutes such a threat is still up for discussion. But the bill says it will: (i) introduce a separate national security investment screening regime, divorced from competition regulation; and (ii) establish a clear, easily available platform to facilitate companies’ and other entities’ interaction with the regime, including having clear statutory timelines for each aspect of the process.
Details of the United Kingdom Bill
But the bill states that “[o]nce the government has decided that there may be a national security concern in a transaction, there will be a detailed review. The government can then take any action it considers necessary and proportionate to address any national security risk.”
The announcement about the bill explains that the “new regime will apply to investors from any country.” But it no doubt is meant to target China—especially on the heels of the decision by the United Kingdom government regarding Huawei. The government decided to ban Huawei from involvement in the United Kingdom’s 5G network. The ban could extend to fixed fiber broadband network rollouts.
No More Huawei 5G Equipment
The bill bans United Kingdom mobile providers from buying new Huawei 5G equipment after the end of the year. They must remove all of the Chinese firm's 5G kit from their networks by 2027.
The United Kingdom tried to understate any delays in deals or mass interference with the country’s industry. The looming damage from Brexit and the current pandemic were paramount.
Most transactions, the legislations explains, will be cleared “without any intervention. Moreover, “foreign direct investment projects can continue to boost jobs and stimulate the economy across the United Kingdom, while ensuring the United Kingdom remains an attractive place to invest,” it noted.
Sectors Affected in the United Kingdom
The bill will require for investors and businesses to tell the government about “proposed deals in a limited number of sensitive sectors.” Despite claiming to be “limited,” the United Kingdom bill will apply either in full or in part to 17 sectors, including:
- Artificial Intelligence
- Autonomous Robotics
- Computing Hardware
- Critical Suppliers to Government
- Critical Suppliers to the Emergency Services
- Cryptographic Authentication
- Data Infrastructure
- Quantum Technologies
- Satellite and Space Technologies
Alok Sharma is the United Kingdom Secretary of State for Business, Energy and Industrial Strategy. He commented, “[t]his Bill will mean that we can continue to welcome job-creating investment to our shores, while shutting out those who could threaten the safety of the British people.”
The United Kingdom government also said that the new law will update the government’s current powers. Those powers “are almost 20 years old and do not reflect the threats we face today.” The bill will make those powers conform with those of the country’s closest allies. This will take place “without hindering the United Kingdom’s world-leading reputation as an attractive place to invest.”