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UK M&A and National Security - the Government's Proposed New Screening Powers

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This week, the UK Government announced new draft powers under the National Security and Investment Bill (the ‘Bill’) to screen certain deals on national security grounds. The proposals apply to takeovers and investments (including minority share acquisitions) by foreign buyers in a wide range of industries from defence and technology to energy, transportation and communications.  Unlike under standard UK merger control rules, the new regime will apply regardless of the target’s revenues, or both parties’ market shares in the UK.  It will also apply to investors from any country.

These proposed powers mirror those adopted by an increasing number of countries around the world to guard against foreign direct investment in strategic sectors – and reflect growing protectionist tendencies amid increasing concern about the ability of foreign companies (often with state backing) to acquire critical infrastructure and assets.  The Government anticipates receiving notifications of up to 1800 transactions a year under the new regime, which will have to be factored into planning deal timetables and risk assessments.

At this stage, the Bill constitutes draft legislation.  It still needs to pass legislative approval and receive royal assent. The timing for this is as yet unclear and may result in amendments to the draft text of the Bill.  However, businesses should already begin factoring these proposals into deal strategy.  Whilst the Government will not use the “call-in power” before the regime has commenced, it will be able to scrutinise deals taking place between 12 November 2020 and commencement (subject to the time limits explored below).  To help businesses, the Government welcomes informal representations in advance of implementation, and it may give advice on what to expect from the regime.


  • The Bill seeks to introduce a national security investment regime separate from general merger control legislation. Two regimes will apply:
  • Mandatory regime: parties will have to notify the Government of relevant deals in mandatory sectors, so-called ‘notifiable acquisitions’. 
  • Voluntary regime: for transactions not falling within defined sectors where the parties consider the transaction may trigger national security concerns.
  • The Bill will replace the Secretary of State’s current powers to scrutinise transactions on national security grounds under the Enterprise Act 2002. 
  • Unlike deals subject to the standard merger control regime:
  • No minimum turnover or share of supply thresholds will apply.
  • The Government will have a five year retrospective power to call in transactions, and it may exercise that power up to 6 months after becoming aware of the deal.  (The five year period will not apply to transactions closed prior to adoption of the Bill.)  Transactions subject to mandatory notification will not be subject to the five year limit. 
  • For transactions occurring between 12 November 2020 (introduction of the draft Bill) and commencement of the new law, the Government will have six months to intervene where it becomes aware of such deals prior to entry into force of the new law.  The five year period will not apply.
  • However, if awareness arises after commencement, the five year period will apply but the Government will only have up to 6 months to intervene once awareness is triggered. 
  • If they meet the usual merger control thresholds, relevant transactions will still continue to be reviewed in parallel by the competition authority, the CMA.


Notification will be voluntary in some cases and mandatory in others. The Government will also be able to ‘call-in’ qualifying transactions which it considers give rise to a risk to national security.

The powers will apply to so-called “trigger events”.  This essentially involves a person gaining control (including via low levels of shareholding) of a:

  • “qualifying entity”: a company, a limited liability partnership, any other body corporate, a partnership, an unincorporated association and a trust;
  • “qualifying asset”: land, tangible property; ideas, information or techniques with industrial, commercial or other economic value, such as trade secrets, databases, source code, algorithms, formulae, designs, plans, drawings and specifications, and software.

Control also includes the acquisition of material influence over a qualifying entity’s policy: the CMA has previously found material influence at shareholding levels well below 15%. Additionally, control may arise via the ability to direct or control the use of an asset to a greater extent than prior to acquisition.


The following three risk factors will be considered in determining the possibility of a national security risk:

1. Target” risk: does the acquisition involve an entity or asset which could be used to undermine national security?

2. “Trigger event” risk: could the event give the acquirer the means to undermine the UK’s national security through disruption, espionage, inappropriate leverage or some other means? 

3. “Acquirer” risk: could the acquirer use its control over the target to undermine national security?

Exercise of the call-in power should not be taken as equal to a determination that the acquirer is hostile: the “target” and “trigger event” risks are just as relevant to the assessment. 


  • The Government will now consult on the sectors  which should face mandatory notification.  These will be deemed “notifiable acquisitions”. 
  • These sectors include: Civil Nuclear; Communications; Data Infrastructure; Defence; Energy; Transport; Artificial Intelligence; Autonomous Robotics; Computing Hardware; Cryptographic Authentication; Advanced Materials; Quantum Technologies; Engineering Biology; Critical Suppliers to Government; Critical Suppliers to the Emergency Services; Military or Dual-Use Technologies; and Satellite and Space Technologies.
  • These sectors are defined in the consultation document available here. The consultation closes on 6 January 2021.


  • Initial screening of notification: maximum 30 working days to decide whether to issue a ‘call-in’ notice.
  • If Government issues a ‘call-in’ notice, it will complete its national security assessment in 30 working days, which can be extended by a further 45 working days and extended further if necessary.
  • Review will not have a suspensory effect (unless the Government orders otherwise).  In the case of a notifiable acquisition, however, it must not be completed until clearance is given.
  • Other than prohibition, potential conditions that might be imposed on problematic deals include:
  • Restriction of access to commercial information
  • Altering the amount of shares for acquisition;
  • Controlling access to certain operational sites or works.


  • Examples of non-compliance?
  • Completing a notifiable acquisition without approval.
  • Failure to comply with an ‘interim order’ (preventing action which might prejudice assessment under a ‘call-in’ notice) or a ‘final order’ (order following national security assessment).
  • Fines of up to 5% of worldwide turnover or £10 million (whichever is the greater).
  • Imprisonment for up to 5 years.
  • Completion of notifiable acquisitions without approval (or otherwise than in accordance with a final order) will be void.


Companies and associations active in the sectors listed above may wish to submit comments, arguing that the national security risks created by transactions in their sector do not justify inclusion in the mandatory notification regime.  Such comments should be submitted by 6 January 2021.

The Bill was introduced to the House of Commons this week at its first reading.  Dates for second reading and subsequent stages have not yet been set.  Once the Bill passes through both the House of Commons, and House of Lords, it will proceed to royal assent and then become law.  The current consultation on sectors, as well as the Bill’s passage through parliamentary stages may result in amendments to the text of the Bill. 

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