UK will no longer be a pushover on tech M&A, says GlobalData

Following the recent news that the UK has introduced a new National Security and Investment Act, which gives the UK government powers to scrutinise and intervene in business transactions, such as takeovers, to protect national security;

Members of GlobalData’s Thematic Research team offer their views:

Dr Lil Read, Analyst, commented:

“Governments globally are finally waking up and realising the power that ‘big tech’ companies have, and taking a proactive approach to regulating them. The US Congress is way behind, legislatively speaking, but chairperson Lina Khan is making waves at the Federal Trade Commission (FTC)—a government body aimed to enforce antitrust law in the US. It appears that she realizes that antitrust is about more than just consumer welfare-based pricing.

“As the world becomes increasingly nationalistic and fragmented, jurisdictions globally are setting out to protect their national assets—especially technology and the home-grown firms providing it. The stage is set for antitrust action to take off, which, compounded with increased security regulation, may lead to tech bubbles across the globe and an increasing ‘splinternet’.

“The new National Security and Investment Act will have implications for mergers and acquisitions (M&A) throughout 2022 and beyond, particularly in the UK. Overseas companies will think twice about acquiring future UK tech, as local tech firms will no longer be such appetizing bargains when they come with a side of regulatory scrutiny. China’s Cyberspace Administration is the world’s extreme example of how national regulators will now control business.”

Mike Orme, Consultant Analyst, commented:

“MI6 security chief Richard Moore recently warned that if you allow another country to gain access to critical data about your country, you erode your sovereignty in a world that is becoming increasingly fragmented, unstable, inward-looking, nationalistic, and politically wary. This is the thinking behind the extension of UK national security laws to veto foreign M&As involving UK companies that directly (or indirectly) supply the defence and intelligence industries.

“It is also what lies behind taking a closer look at the implications of Nvidia’s acquisition of Arm. It is not just part of a drive to consolidate and protect the UK’s technology treasures on grounds of sovereignty, but to keep Arm operating under UK, rather than US, law.

“The US looks more unstable by the day, and global alliances are becoming ever more fragile as competing nation states fight over markets, access to data, strategic technologies, energy, and food, as well as, as we’ve seen recently, COVID-19 vaccines.”

David Bicknell, Principal Analyst, added:

“The UK’s National Security Investment Act is vague on what exactly constitutes ‘national security’. That is a deliberate move to keep the interpretation of law as open as possible when it serves UK tech interests.

“The UK government may insist that it has been previously strong on acquisitions, but that is scarcely the case. However, this Act marks a sea change in Whitehall’s attitude. UK Chancellor Rishi Sunak has clearly stated his intentions on making London an ‘incredibly attractive place’ for companies to list, Arm included.

“However, actions must speak louder than words. The UK will have to put its money where its mouth is, step into the Nvidia-Arm furore, and show it has teeth. That would clearly mean creating a ‘UK Inc’ vehicle to support Arm, if it is floated in London. The bottom line is that the UK will no longer be a pushover when it comes to tech acquisitions. Nvidia-Arm is the line in the sand.”

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