The UK government plans to play a bigger role in the scrutiny of corporate takeovers, potentially making it harder for foreign buyers to acquire British companies. The proposals, set out by business and energy secretary Greg Clark, state that the government will be able to intervene in mergers that “raise national security concerns, even when they involve smaller businesses”.
Under the current regulations, the government is only allowed to mediate mergers if the target company generates revenue in excess of £70m, or if the deal increases the buyer’s share of the UK market to 25 per cent or above. The new guidelines lower the turnover threshold to just £1m and shelve the 25 per cent rule completely. According to Mr Clark: “It makes sense to have a framework in place that allows comprehensive scrutiny, so that everyone can know foreign investments don’t affect national security.”
A new industrial strategy has been in the mix since Theresa May became prime minister in July 2016 and suggested that the government should be able to step in and 'defend' important sectors of the economy. But Mrs May has since been criticised for allowing two big UK-based technology companies to fall to foreign investors. Chipmaker Arm was sold to Japanese group Softbank, while Aveva (AVV) merged with French multinational Schneider Electric.
Interestingly, the number of foreign takeovers has decreased in 2017 following nine consecutive quarters of growth. There are currently 23 listed companies in various stages of the takeover process, with 10 of these preparing to be acquired by overseas companies. Most recently, challenger bank Aldermore (ALD) and technology communications group Telit (TCM) were added to the list after both confirmed interest from overseas investors.
Aldermore has received a £1.1bn early-stage offer from South African financial services group FirstRand. The board seems pleased with the proposal, which could mark the third time this year a challenger bank is taken private. Meanwhile, Telit recently confirmed the potential sale of various business divisions after a Financial Times report alleged that a number of private equity buyers are considering making an offer. The group has also received significant interest from Chinese investment house Run Liang Tai Management, which took a position in Telit only a few weeks ago and has already built this up to 14 per cent.
