UK government to intervene on M&A deals with national security concerns

New rules have come into force to allow the government to intervene in potential takeovers by overseas companies of UK business developing technology with national security applications.

Ministers can only intervene in mergers and takeovers that give rise to specific public interest concerns of national security, financial stability or media plurality.

From Monday, ministers will be able to intervene for companies developing certain types of military technology, computer hardware and quantum technology with turnover of more than £1m, with this threshold cut from £70m.

The new rules remove the requirement that a merger or takeover in these sectors lead to an increase in the parties’ combined share of supply of relevant goods or services before the government is able to intervene. For mergers the three relevant areas, the share of supply test will now be met where a merger or takeover involves a target with 25% or more share of supply in the UK, as well as where the deal leads to an increase in the share of supply to, or above, this threshold, which is the previous requirement.

Business minister Richard Harrington said: "These new rules ensure mergers and takeovers in key areas of the economy cannot risk our national security, while maintaining the openness to trade and investment that is underpinned by our modern industrial strategy."

The changes, while made for national security-related reasons, also amend the thresholds that allow the independent Competition and Markets Authority to scrutinise mergers for competition concerns.

But while there are likely to be more transactions in the three sectors that come under the jurisdiction of the CMA, the watchdog said it does not expect to change how it will assess mergers within these sectors from a competition perspective.