Government must walk 'tightrope' on new M&A rules, partners say
Unclear takeover rules could reduce the attractiveness of the UK as an investment destination post-Brexit
October 24, 2017 at 08:32 AM
4 minute read
The UK government must tread a fine line between scaring off potential investors and protecting the UK's national security when formulating new takeover rules, according to partners.
M&A and infrastructure partners warn that the government faces a difficult balancing act as it formulates new the takeover rules that are intended to give the government more power to intervene in M&A deals.
Their warnings come after a government green paper published earlier this month by the Business and Energy Secretary Greg Clark set out plans to increase the government's ability to intervene in takeovers, particularly in areas that are deemed a national security risk, such as critical infrastructure, technology and defence.
Addleshaw Goddard corporate partner Simon Wood, who returned to the firm from a two-year stint at the Takeover Panel earlier this month, says: "The tightrope they are trying to walk is ensuring that Britain remains open for business but also increasing the degree of protection around national security. That includes not just the defence sector but energy, communications and utilities, which are an important fabric of the UK's infrastructure."
Freshfields Bruckhaus Deringer infrastructure partner Richard Thexton broadly welcomes the proposals but calls for more guidance as to where the government should be notified of a deal on national security grounds, in order to avoid cases where the government intervenes in transactions at a late stage.
"Under the voluntary regime, the government will have power after a non-notified deal is closed to go back and set it all aside, which from a seller's perspective would be a disaster. Clear guidance on which deals should be notified under the voluntary regime is therefore critical," he says.
Ashurst infrastructure partner Jason Radford meanwhile cautions that the threat of increased governmental oversight could spark a sell-off among UK infrastructure investors.
"The ramifications for the market are difficult to assess at this stage," he says. "It could notionally prompt a sell-off such that owners are looking to take advantage of good market conditions before the risk of increased government oversight becomes a reality."
The UK's upcoming exit from the European Union further increases the importance of avoiding protectionist measures, particularly as the present government's Brexit policy has been based around positioning the UK as what International Trade Secretary Liam Fox calls a "proud champion in the cause of global free trade".
There is also increasing scepticism about the UK's future as a recipient of foreign direct investment (FDI), with 31% of investors responding to a 2017 EY survey saying they expect the UK's attractiveness as an FDI destination to decline, compared with just 16% in 2016.
Wood says: "Being open for business worldwide post-Brexit will be very important – the government recognises the risk that too much interference could produce a regime that deters inward investment."
Law firms have benefited from investor appetite for UK infrastructure assets in recent years, with key deals this year including National Grid's £13.8bn sale of its gas distribution business to an international consortium including Australian bank Macquarie and Qatari sovereign wealth fund the Qatar Investment Authority.
Linklaters led for National Grid on the deal, while Clifford Chance, CMS and Cleary Gottlieb Steen & Hamilton advised the winning consortium.
A plethora of other firms played roles including Eversheds, Addleshaw Goddard, DLA Piper, Irwin Mitchell, Shakespeare Martineau and Dentons, underlining the importance of infrastructure deals to the legal sector.
However, while there are concerns among partners that unclear rules could dampen investor appetite to make acquisitions in the UK, Thexton argues that the UK remains an appealing place for deals.
He concludes: "The UK will always be an attractive place for people to invest; it has a stable regulatory and legal environment and that won't change as a result of these proposals, provided the government gives the necessary clear guidance. Yes, it is a hurdle to making the investment in the first place, but frankly, it's a hurdle that well-informed buyers are already thinking about and engaging with government on, so I don't see why it should put people off."
This content has been archived. It is available through our partners, LexisNexis® and Bloomberg Law.
To view this content, please continue to their sites.
Not a Lexis Subscriber?
Subscribe Now
Not a Bloomberg Law Subscriber?
Subscribe Now
NOT FOR REPRINT
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
You Might Like
View AllFreshfields, MoFo Act on $1.8B TOPPAN Deal As Japan's US Buying Spree Continues
Cox & Palmer to Merge with Benson Buffett in St. John’s, Canada’s Easternmost City
2 minute readTrending Stories
- 1The Tech Built by Law Firms in 2024
- 2Distressed M&A: Mass Torts, Bankruptcy and Furthering the Search for Consensus: Another Purdue Decision
- 3For Safer Traffic Stops, Replace Paper Documents With ‘Contactless’ Tech
- 4As Second Trump Administration Approaches, Businesses Brace for Sweeping Changes to Immigration Policy
- 5General Warrants and ESI
Who Got The Work
Michael G. Bongiorno, Andrew Scott Dulberg and Elizabeth E. Driscoll from Wilmer Cutler Pickering Hale and Dorr have stepped in to represent Symbotic Inc., an A.I.-enabled technology platform that focuses on increasing supply chain efficiency, and other defendants in a pending shareholder derivative lawsuit. The case, filed Oct. 2 in Massachusetts District Court by the Brown Law Firm on behalf of Stephen Austen, accuses certain officers and directors of misleading investors in regard to Symbotic's potential for margin growth by failing to disclose that the company was not equipped to timely deploy its systems or manage expenses through project delays. The case, assigned to U.S. District Judge Nathaniel M. Gorton, is 1:24-cv-12522, Austen v. Cohen et al.
Who Got The Work
Edmund Polubinski and Marie Killmond of Davis Polk & Wardwell have entered appearances for data platform software development company MongoDB and other defendants in a pending shareholder derivative lawsuit. The action, filed Oct. 7 in New York Southern District Court by the Brown Law Firm, accuses the company's directors and/or officers of falsely expressing confidence in the company’s restructuring of its sales incentive plan and downplaying the severity of decreases in its upfront commitments. The case is 1:24-cv-07594, Roy v. Ittycheria et al.
Who Got The Work
Amy O. Bruchs and Kurt F. Ellison of Michael Best & Friedrich have entered appearances for Epic Systems Corp. in a pending employment discrimination lawsuit. The suit was filed Sept. 7 in Wisconsin Western District Court by Levine Eisberner LLC and Siri & Glimstad on behalf of a project manager who claims that he was wrongfully terminated after applying for a religious exemption to the defendant's COVID-19 vaccine mandate. The case, assigned to U.S. Magistrate Judge Anita Marie Boor, is 3:24-cv-00630, Secker, Nathan v. Epic Systems Corporation.
Who Got The Work
David X. Sullivan, Thomas J. Finn and Gregory A. Hall from McCarter & English have entered appearances for Sunrun Installation Services in a pending civil rights lawsuit. The complaint was filed Sept. 4 in Connecticut District Court by attorney Robert M. Berke on behalf of former employee George Edward Steins, who was arrested and charged with employing an unregistered home improvement salesperson. The complaint alleges that had Sunrun informed the Connecticut Department of Consumer Protection that the plaintiff's employment had ended in 2017 and that he no longer held Sunrun's home improvement contractor license, he would not have been hit with charges, which were dismissed in May 2024. The case, assigned to U.S. District Judge Jeffrey A. Meyer, is 3:24-cv-01423, Steins v. Sunrun, Inc. et al.
Who Got The Work
Greenberg Traurig shareholder Joshua L. Raskin has entered an appearance for boohoo.com UK Ltd. in a pending patent infringement lawsuit. The suit, filed Sept. 3 in Texas Eastern District Court by Rozier Hardt McDonough on behalf of Alto Dynamics, asserts five patents related to an online shopping platform. The case, assigned to U.S. District Judge Rodney Gilstrap, is 2:24-cv-00719, Alto Dynamics, LLC v. boohoo.com UK Limited.
Featured Firms
Law Offices of Gary Martin Hays & Associates, P.C.
(470) 294-1674
Law Offices of Mark E. Salomone
(857) 444-6468
Smith & Hassler
(713) 739-1250