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On 11th June, in an effort to strengthen national security, the UK Government adopted a set of new regulations to reinforce its merger and takeover scrutinising ability.
The move came after the release of the National Security and Infrastructure Investment Review Green Paper in October 2017, a report outlining gaps in the existing approach and proposing solutions for a more comprehensive framework.
Until recently, mergers and acquisitions (M&A) were examined in accordance with the Enterprise Act 2002, as drafted in November 2002. The text of the Act recognised clear grounds for the Government to have a legitimate interest in mergers, but it allowed investigating M&A only for companies of a considerable size and with a considerable turnover. Technological advances and national and global economic developments that occurred since the introduction of the Act, however, made it possible for businesses with small turnovers to play a significant role in designing and manufacturing innovative and technological goods. In light of this, the existing draft of the Act was deemed insufficient to ensure that national security risks received the deserved level of scrutiny in all cases.
The new regulation, as amended in the 2002 Act, broadens the scope of the scrutiny, allowing the UK Government to examine the M&A activity of any company operating in the military, dual-use, computing hardware and quantum technology economic area, with a UK turnover of a least £1 million (reduced from £70 million) and/or an existing share of supply of at least 25%. The process for ministerial intervention remains as set out in the original text of the Enterprise Act 2002, and the changes do not affect the voluntary notification merger system, nor the powers of the European Commission under the EU Merger Regulation. Parties whose merger meets the Commission’s tests are still required to notify and obtain approval from the Commission prior to the completion of a transaction.
As a result of the amendments, while relevant enterprises are not required to take immediate direct action, they are encouraged to engage with specific departments (as indicated in Annex A of the 2018 guidance issued by the Government), to ensure that their mergers do not raise national security concerns.
For global export controls and customs compliance pre- and post- merger and acquisition due diligence, disclosures and remediation activities, and integration support, please contact our Deloitte Global Export Controls and Sanctions Team.
Julia leads Deloitte’s Global Export Controls & Sanctions team in London. She has led compliance-enhancing projects for a number of years in a variety of industries, including financial services, consumer products, oil and gas, aerospace & defence, manufacturing and the technology, media and telecommunications industries. She is a specialist in US, EU, UK, French, German and other EU Member State military, dual-use and sanctions regulations. Julia has a thorough understanding of the export control challenges faced by companies involved in international trade activities. More broadly, Julia supports her clients in developing integrated compliance programmes to manage their regulatory compliance requirements (including export controls, ABAC and data privacy), with a focus on lean business requirements to manage regulatory obligations. Julia has also been involved in the development of a number of different technology solutions to manage export compliance requirements, and has supported clients to develop and implement their digital strategies for effective compliance management.