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
© 2025 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 AllHengeler, Noerr, Freshfields Steer Multi-Million Euro Deals for XXXLutz, Huf Group & More
3 minute readFreshfields Leads European M&A Rankings Again in 2024, as U.S. Firms Gain Market Share
5 minute readTrending Stories
- 1Chief Judge Joins Panel Exploring Causes for Public's Eroding Faith in NY Legal System
- 2Pogo Stick Maker Wants Financing Company to Pay $20M After Bailing Out Client
- 3Goldman Sachs Secures Dismissal of Celebrity Manager's Lawsuit Over Failed Deal
- 4Trump Moves to Withdraw Applications to Halt Now-Completed Sentencing
- 5Trump's RTO Mandate May Have Some Gov't Lawyers Polishing Their Resumes
Who Got The Work
J. Brugh Lower of Gibbons has entered an appearance for industrial equipment supplier Devco Corporation in a pending trademark infringement lawsuit. The suit, accusing the defendant of selling knock-off Graco products, was filed Dec. 18 in New Jersey District Court by Rivkin Radler on behalf of Graco Inc. and Graco Minnesota. The case, assigned to U.S. District Judge Zahid N. Quraishi, is 3:24-cv-11294, Graco Inc. et al v. Devco Corporation.
Who Got The Work
Rebecca Maller-Stein and Kent A. Yalowitz of Arnold & Porter Kaye Scholer have entered their appearances for Hanaco Venture Capital and its executives, Lior Prosor and David Frankel, in a pending securities lawsuit. The action, filed on Dec. 24 in New York Southern District Court by Zell, Aron & Co. on behalf of Goldeneye Advisors, accuses the defendants of negligently and fraudulently managing the plaintiff's $1 million investment. The case, assigned to U.S. District Judge Vernon S. Broderick, is 1:24-cv-09918, Goldeneye Advisors, LLC v. Hanaco Venture Capital, Ltd. et al.
Who Got The Work
Attorneys from A&O Shearman has stepped in as defense counsel for Toronto-Dominion Bank and other defendants in a pending securities class action. The suit, filed Dec. 11 in New York Southern District Court by Bleichmar Fonti & Auld, accuses the defendants of concealing the bank's 'pervasive' deficiencies in regards to its compliance with the Bank Secrecy Act and the quality of its anti-money laundering controls. The case, assigned to U.S. District Judge Arun Subramanian, is 1:24-cv-09445, Gonzalez v. The Toronto-Dominion Bank et al.
Who Got The Work
Crown Castle International, a Pennsylvania company providing shared communications infrastructure, has turned to Luke D. Wolf of Gordon Rees Scully Mansukhani to fend off a pending breach-of-contract lawsuit. The court action, filed Nov. 25 in Michigan Eastern District Court by Hooper Hathaway PC on behalf of The Town Residences LLC, accuses Crown Castle of failing to transfer approximately $30,000 in utility payments from T-Mobile in breach of a roof-top lease and assignment agreement. The case, assigned to U.S. District Judge Susan K. Declercq, is 2:24-cv-13131, The Town Residences LLC v. T-Mobile US, Inc. et al.
Who Got The Work
Wilfred P. Coronato and Daniel M. Schwartz of McCarter & English have stepped in as defense counsel to Electrolux Home Products Inc. in a pending product liability lawsuit. The court action, filed Nov. 26 in New York Eastern District Court by Poulos Lopiccolo PC and Nagel Rice LLP on behalf of David Stern, alleges that the defendant's refrigerators’ drawers and shelving repeatedly break and fall apart within months after purchase. The case, assigned to U.S. District Judge Joan M. Azrack, is 2:24-cv-08204, Stern v. Electrolux Home Products, Inc.
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