The UK government has introduced regulation enabling greater scrutiny of foreign takeovers of British companies, to ensure such deals do not hamper the country’s ability to tackle public health emergencies.
The reforms to the 2002 Enterprise Act were brought before parliament earlier this week and will allow the government to scrutinise foreign takeovers of companies involved in pandemic response, such as tech firms, vaccine research companies or those producing personal protective equipment.
The new powers specify three sectors the UK government considers central to national security and in which it could intervene in the event of a takeover: artificial intelligence, cryptographic authentication technology and advanced materials.
According to the government, the economic disruption triggered by COVID-19 has left such critical businesses at greater risk of hostile takeovers, potentially by “malicious parties”.
Business Secretary Alok Sharma stated: “These powers will send an important signal to those seeking to take advantage of those struggling as a result of the pandemic that the UK government is prepared to act where necessary to protect our national security.”
“These measures will strike the right balance between the UK’s national security and resilience while maintaining our world-leading position as an attractive place to invest. The UK is open for investment, but not for exploitation”.
The government is said to have been put on alert after an aborted Chinese takeover of Imagination Technologies, a Hertfordshire-based chip designer, in April resulted in a emergency commons inquiry into potential asset-stripping of UK tech firms.
However, City figures have warned that the measures could discourage foreign investment in British companies and impact the UK economy. CMS partner Alasdair Steele said: “Anything that starts making people think twice about how easy it is to do a deal [...] is going to put some people off because you've now got uncertainty.”
Steele warned that, without advance government clearance, bidders could see the time and cost of deal negotiation wasted when takeovers are later blocked. He added: “A politician standing up and answering to voters and press campaigns is not necessarily as rules driven as a competition authority.”
Veronica Roberts, a competition lawyer at Herbert Smith Freehills, felt the reforms were balanced but cautioned against powers being taken too far when the National Security and Investment Bill is introduced later in the summer: “That's where they could step over into potentially deterring foreign investment if they give themselves powers that are too wide-ranging,” Roberts said.
The reform follows the introduction of similar screening measures in the EU. The European Union has introduced tougher scrutiny in an effort to strengthen “strategic autonomy” from the USA and China and to defend European firms from subsidised foreign takeovers.
The powers add to legislation introduced in 2018, which enabled the government to intervene in takeovers of companies working in military products and technologies.
To read our recent piece on how government coronavirus loan schemes could lead to corporate bankruptcies, click here.
Find businesses for sale here.
This is a rare opportunity to acquire a well established and highly profitable driveway and landscaping business carrying out projects across Ayrshire. Specialising in quality driveways, patios and landscaping this business has an excellent reputatio...
This is a rare opportunity to acquire one of the leading schoolwear and workwear wholesalers in the UK. Annual net turnover of over £1,000,000 with an excellent gross profit in excess of 40%. Well-established manufacturing supply chain producing own...
This is a rare opportunity to acquire an established and profitable quality joinery manufacturing business with spacious freehold premises located in the beautiful Speyside area of the Highlands.
Please choose your settings for this site below. For more information please read our Cookie Policy
These cookies are necessary for our website to function properly and provide you with access to all features.
These are analytics cookies that help us to improve the way our website works.
These are used to improve the functional performance of the website and make it easier for you to use.