The UK government has reportedly passed a new act wherein Ministers will now have greater power to intervene in foreign takeovers of domestic firms, enabling them to effectively unpick deals that can cause harm to national security.
Even before the passing of the new act, Ministers were able to intervene in foreign-led takeovers that could affect the country’s economic stability, media plurality, national security, or even the country’s response to the pandemic.
However, the National Security and Investment Act, described by the government as the biggest shake-up to UK’s national security regime in twenty years, has enhanced the existing powers of Ministers, building on their ability to deploy national security rationale while calling in a takeover.
The act has identified 17 areas in the UK economy where greater security is needed in the case of overseas investors seeking to make acquisitions. Along with defense and military technology, minsters will be able to inspect deals in other sectors including advanced robotics, transport, artificial intelligence, civil nuclear sector, and quantum technology.
If a foreign potential buyer’s stake goes above the three trigger points, that is 25%, 50%, and 75%, officials will be notified to examine the deal, and the government will have the power to block the transaction or unwind it retrospectively.
The act is supposedly being perceived as a response to concerns regarding the takeovers of strategically key technology businesses by Chinese enterprises, with some deals already being examined by officials under existing rules.
These deals, while relatively small, include the sale of semiconductor maker Newport Wafer Fab to China’s Wingtech owned Dutch company. It is important to note that Wingtech is partially also backed by the state.
Foreign buyouts by US companies also came under scrutiny in 2021, with the takeover of defense suppliers Ultra Electronics and Meggitt, as well as of the chipmaker Arm Ltd. by its US rival Nvidia.
The new rules will affect all deals that were completed on or after 12th November 2020, which is the day the bill was first introduced to the parliament.
Business groups, however, warn that broadening the criteria will create unnecessary meddling in deals and discourage investments.