New UK national security merger thresholds comes into force

In the relevant sectors, the Secretary of State would be able to intervene (and potentially prohibit the merger; although, in practice, remedies are usually agreed) on national security grounds if:

• the UK turnover of the target exceeds £1 million (reduced from the normal £70 million); or
• the target has an existing UK share of supply of 25 per cent or more (this would remove the need for an increase in market share); or
• the transaction would create or enhance a UK share of supply of 25 per cent or more (i.e. the existing "share of supply test").

For deals involving targets in the relevant sectors, it should be noted that many deals will in principle be captured by the new regime, even if they have no obvious connection to national security. It is a matter for the Secretary of State's discretion as to whether he or she actually does intervene on national security grounds.

Additional details on the changes, and on the background to their introduction, is set out in our newsletter article of 9 April 2018. 

The changes, while made for national security-related reasons, also technically amend the thresholds that allow the independent 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. 

On 11 June, the CMA and Government also published their technical guidance in relation to these changes.  There have been a limited number of changes since the draft guidance was published in March 2018, including:

• The Government contacts have been amended from a single point of contact to separate Government contacts depending on whether the area covered is military or dual-use (Ministry of Defence), computing hardware (Department for Business, Energy & Industrial Strategy (BEIS)), or quantum technologies (Department for Digital, Culture, Media & Sport (DCMS)).  This underscores the need for affected businesses to have a carefully thought through strategy for engagement with the Government as it may be necessary to engage with multiple Government bodies.  
• The CMA guidance has been amended to make clear that the amendments have prospective effect only.