Tue. Jan 18th, 2022


This week, Britain joined the (now exclusive) group of countries that are boosting foreign investment. Like similar rules in the US and China, Britain’s National Security and Investment Act is broad and vague.

It returns transactions 17 sectors subject to political scrutiny; those who fall short of certain criteria will be blocked or subjected to remedies. Actions already completed, such as those in the US with appointment program Grindr and its Chinese copper, caught in the tow net. So too are intra-company transactions and foreign-to-foreign transactions, as long as business activities affect the UK.

Mandarins who need to review alleged transactions can expect to be busy. The government expects up to 1,800 notifications per year, or 36 per week. Any investment banker obliged to deal with the US Foreign Investment Committee can explain what follows: glacier delays and hastily drafted junior staff.

One can easily dismiss this intensified investigation as contradictory to the United Kingdom, a country arranged by the OECD among the least restrictive countries on foreign direct investment and barely protectionist. But Britain feels compelled to keep up with global security trends while still seeking foreign investment. Hence the creation, just 14 months before the NSIL became law, of the Investment Office, which has so far withdrawn £ 18 billion in investment.

Unfortunately, foreign investment does not comply with domestic industrial policy. The areas that are causing revision – robotics, artificial intelligence, data infrastructure – are inevitably the ones in which buyers are most interested. A cynic might further cabbage that China, whose competence in the field scare those in Washington, is unlikely to find it much worthwhile to sneak away from the UK anyway.

Previous transactions in sensitive areas illustrate where attractions lie. Chinese ownership of a stake in a nuclear power plant, cemented in the golden era of Sino-British relations, is now to be settled. Nvidia’s proposed acquisition of chip designer Arm has regulators around the world crawl over the transaction.

However, precedent shows that it is often economic concerns that cause any gnashing of teeth over foreign buyers. California-based Viasat was able to continue its $ 7.3 billion acquisition of the British satellite company Inmarsat along with promises to continue investing in the country. Cobham, which is controlled by Advent of the US, has guaranteed jobs as part of its £ 2.6 billion offer for Ultra Electronics, now under the microscope. The UK’s new powers can serve to extract similar promises, more often than not to block deals.

Lex recommends the FT’s Due Diligence newsletter, a composite information session on the world of mergers and acquisitions. Click here to log in.



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