Changes to the UK’s merger regime to recognise the growing importance of small British businesses in developing cutting edge technology products with national security applications came into force on 11th June 2018.
In order to address changes in the market, the Government amended the threshold tests for businesses in the military, dual-use, computing hardware and quantum technology sectors that are most likely to have implications for our security.
These changes allow ministers to intervene on certain grounds when the target business’s UK turnover is more than £1 million, down from £70 million under the previous rules. They also 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.
While the changes were introduced for national security-related reasons, they also amend the thresholds that allow the Competition and Markets Authority (CMA) to scrutinise mergers for competition concerns. However, neither the Government nor the CMA expect that the changes will bring about a material change in the CMA’s approach to the assessment of mergers on competition grounds.
“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,” explained Business Minister Richard Harrington.
The changes follow a consultation launched last year to amend the Enterprise Act to reform and strengthen the Government’s powers. These new rules are the first step, with broader changes expected to be announced in a white paper later this year.
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