THE ULTIMATE GUIDE ON:

MERGERS &
ACQUISITIONS
CONTENTS

INTRODUCTION TO M&A

TYPES OF M&A

WHY COMPANIES DO M&A

THE ROLE OF LAWYERS IN M&A

FINANCING M&A

RECENT M&A DEALS

THE ROLE OF THE CMA

M&A SWOT ANALYSIS

 | THE BUSINESS UPDATE PAGE | 02

INTRODUCTION
TO M&A
Written by: Maciko Chan

M&A is generally a consolidation of companies

or assets through different financial
transactions. M&A can range from months to
years as they have a lengthy process from
marketing, negotiating and closing. They are
also complex transactions involving the
majority of practice areas including tax,
employment, competition, intellectual
property, finance, corporate and real estate.

Over the last 20 years, there are more than

790,000 M&A transactions worldwide with a
value over $57 trillion (IMAA). The largest
transaction to date is the 1999 Vodafone
Airtouch PLC and Mannesmann AG acquisition,
with a transactional value of $202.7 billion.

Despite the current unprecedented situation

of coronavirus that resulted in an economic
downturn, M&A transactions in 2020 are still
expected to be positive, with big companies
opportunistically targeting smaller companies
in need for survival. For example, tech
companies are seen to acquire start-ups such
as Google to Fitbit and Intel to Moovit. Private
equity companies are also utilising this period
to acquire failing companies such as Bain
Capital seeking to buy Virgin Australia.
 | THE BUSINESS UPDATE PAGE | 02

TYPES OF M&A
Written by: Laura Johnson

Merger Definition: When two companies combine to form a new company.

Example: BB&T and SunTrust merging to create Truist in 2019.

Acquisition Definition: The purchase of one company by another company

(hostile or friendly). They can remain separate or become integrated.
Example: The acquisition of Seal Software by DocuSign in 2020.

Definition: Involves two companies with similar products or services.

Horizontal M&A Example: Heinz and Kraft Foods merging to create Kraft Heinz in
2015.

Definition: Involves two companies in the same industry, who occupy

Vertical M&A different positions on the supply chain.
Example: Dell’s acquisition of EMC, a data storage company, in 2015.

Conglomerate M&A Definition: Involves companies in different industries.

Example: The acquisition of Whole Foods by Amazon in 2017.

Reverse M&A Definition: A private company acquires a public company to avoid the
process of going through an IPO (initial public offering).
Example: The New York Stock Exchange merging with Archipelago to
create NYSE Group Inc. in 2006.

Definition: The acquisition of a distressed company (typically by a

Distressed M&A strategic buyer such as a private equity fund).
Example: The acquisition of Debenhams by a consortium of lenders,
Celine UK NewCo 1 Ltd. in 2019.

Definition: A part of the business is split off from the rest of the
Spin Off company and made into a new entity.
Example: PayPal spinning off from eBay in 2017.

Definition: When two or more companies agree to share profits and

Joint Venture losses for a particular project.
Example: Toyota and Panasonic establishing Prime Planet Energy &
Solutions Inc. in 2020.

Definition: An alternative to a merger, whereby companies partner on

Swiss-Verein branding without sharing profits or legal liabilities.
Example: Baker McKenzie adopted this structure in 2004.
| THE BUSINESS UPDATE PAGE | 02

Written by: Maryann Chen

WHY COMPANIES DO M&A

So why do companies seek to merge with or acquire others?

Synergies that could be gained: synergies are when the combination

of two companies results in a company that is more valuable than the
sum of the two i.e. value creation.

There are two sources of synergies:

Cost saving synergies: from cutting redundant management or
office space, consolidate operations, economies of scale, etc
Revenue generating synergies: from freedom to raise prices due
to reduced competition, cross-marketing, increased R&D
capabilities, etc

New market presence from combining with an entity in a different

geographical location
Diversification of product offerings, especially prominent for
conglomerate mergers to diversify risks related to company
operations
Eliminate competition and gain a larger market share, relevant for
horizontal mergers
Increase supply chain pricing power and eliminate an entire tier
of costs by combining with a supplier or distributor, relevant for
vertical mergers. i.e. the company could save on the margins the
supplier was previously adding
Gain brand recognition from merging with a household name or
for the news and press coverage from deal announcements
Gain PP&E (property, plant and equipment) or IPs (intellectual
property) without the need to create or build their own which can
be costly and time consuming
Management ego driving the desire to run a larger company
(“empire building”) and increase personal salaries/compensation
Tax incentives either to lower tax exposure in a certain location or
merge a company with significant taxable income with one that
has substantial carry forward tax losses to reduce the total tax
liability. Naturally M&A purely for tax purposes are illegal and
therefore such reasonings would usually be covered up by
something else
Increase financial capacity as a consolidated entity can have
greater access to financing, whether that be debt or equity, to
finance its operations or business development
PAGE | 03 THE BUSINESS UPDATE |

Competing and clashing in company

culture may lead to complications and M&A
RISKS AND
negatively affect collaboration and
management.

CHALLENGES
Wrong deal valuations and
miscalculations leads to overestimating
synergies, eventually destroying the
company value.

Retention of staff is a result from

potentially a surplus of employees due
to the consolidation of both companies
and this may lead to layoffs and
redundancies.

Insufficient due diligence which causes

targeting the wrong company.
| THE BUSINESS UPDATE PAGE | 04

WHAT DO
LAWYERS DO IN
AN M&A PROCESS?
Written by: Lavania Xavier

Stage 1: During the stage one process, lawyers work closely

with advisors when finding a potential client. Usually they
would propose to work as one unit for any intentional buy-
side or sell-side M&A. They would work on the pitch where
they would derive information and present it to possible
clients.

Lawyers would also type out the Advisory Agreement

(“Mandate”) and a Non-Disclosure Agreement (“NDA”) for
clients that show interest in pursuing an M&A.

Stage 2: Basic due diligence is conducted by both analysts

and lawyers in this stage. The-basic due-diligence surrounds
identifying the client’s objectives and appropriate deal
structure going forward. Some clients might want to keep
certain things quiet, thus why the type of deal structure
agreed upon is imperative.

Additionally, there would be a sell-side due-diligence and

basic preliminary valuation of the Client. (Note: this section
again is done by both lawyers and analysts (hand-in-hand)).

Another NDA is done here by the lawyers as well as the 1st

Phase process letter that explains the next steps for a
potential buyer moving forward.

Stage 3: NDA negotiations, future buyers/sellers would do an

NDA negotiation and then move on to execution. Lawyers
are involved heavily during these steps and would need the
time to confer with their clients. (Potentially, dragging this
out)

Information memorandum will be drawn up by both lawyers

and analysts (cross-checking with NDAs) and it will then be
distributed to potential buyers/sellers.
PAGE | 05 THE BUSINESS UPDATE |

WHAT DO
LAWYERS DO IN
AN M&A PROCESS?

Stage 4: Lawyers and analysts will again work together

and evaluate non-binding offers and shortlist potential
investors.

Lawyers will then perform a more rigorous due-

diligence on the potential investors and further
shortlist candidates based on their client’s wants and
needs. Cross-checking with regulations is also done
here.

Lawyers will also start drafting definitive (Shareholder

Agreement) SHA and (Share Purchasing Agreement)
SPA agreements which will dictate the price per share
and the percentage of shares to be bought moving
forward.

Preparation of the 2nd Phase process letter will also

be done by both lawyers and analysts.

Stage 5: Major due diligence will be done here by the

lawyers specifically in financials, tax, legal and
technicalities.

Stage 6: Once the binding offers are received,

negotiations will be conducted by the lawyers to
ensure that their clients are protected. Condition
precedents will be analysed and checked throughout.
(If there are earn out agreements, these will also be
checked here).

Competition clearance by the CMA will also be sent

and cleared before finalising the deal.

Stage 7: Once this is done, closing will take place

conditional on board approval and the execution of
the SHA & SPA agreements will take place.
| THE BUSINESS UPDATE PAGE | 06

FINANCING
M&A
Written by: Robert Iatan

Introduction

For the acquiring company to buy shares

in the target company, the acquirer must
have the capital necessary to buy those
shares. Sometimes the acquirer has
enough money to buy the shares directly
through cash, but in most instances the
acquirer will need to use debt financing
or equity financing to get the capital
necessary to complete the deal.

Cash Acquisition

The acquiring company pays for the shares

required to gain a controlling stake in the
company through cash.

Pros
Most straight-forward form of financing,
simply a transfer of capital in exchange
for shares in the target company.

Cons
Deals can be very expensive, acquiring
companies do not often have the funds
necessary to finance a full-cash deal.
Cash acquisitions are very risky, as the
acquiring company will be entitled to
little to none of the assets should the
target business fail, and will have
maximum exposure, losing all of the
capital.
PAGE | 07 THE BUSINESS UPDATE |

Selling Bonds

The acquiring company will sell corporate bonds that will give the
acquiring company the capital necessary to buy the shares to get
a controlling stake of the target company.

Pros
The acquiring company will not have to give away control of
its company in order to make the capital necessary for buying
shares.
Cons
Corporate bonds are riskier than government bonds, so a
company may face difficulty in getting customers for selling
bonds.
Will need to pay back those who bought their bonds, but with
a coupon price as well (coupon means the same as interest
but it is used for bonds).

Loan Financing

Under this type of financing, the acquirer will get a loan from a
bank to pay for the shares required to gain a controlling stage in
the target company. There are a number of different types of
debt financing, such as: secured - if the borrower defaults on the
loan, the bank seizes assets from the borrower (like in a
mortgage); unsecured - if the borrower defaults, the bank cannot
seize any assets from the borrower (usually come with a higher
interest rate); asset-backed - if the borrower defaults, the bank
seizes the target company’s assets (fixed assets, inventory,
intellectual property, receivables, etc.). In all circumstances the
bank will conduct due diligence on both the acquiring company
and the target company to assess their financial health, looking
at the companies’ cash flow, liabilities, and profit margins.

Pros
Cheapest form of M&A for the acquirer, lower capital cost
than equity.
Offers tax advantages, as the debt payments can be
deducted from profits.
Cons
Acquiring the company is burdened with paying back the loan
plus interest, which reduces profits and could reduce growth.
High amounts of debt will make raising equity more difficult.
| THE BUSINESS UPDATE PAGE | 08

Mezzanine Finance
Mezzanine financing is financing that involves a
mixture of both debt and equity, with the lender
having the right to convert that loan into equity if
the company defaults, but only after all senior debts
are paid off. These loans are unsecured, so the
lender will not receive assets should the company
default.

Pros
Mezzanine debt structure is often very flexible
for the acquiring company.
Cons
As these loans are risky, they often come with
high interest rates compared to normal loans.
Lenders may impose covenants (rules) on the
loan, to make up for the loan being unsecured,
which would limit what the company can do.

Vendor Take-Back Loan (VTB)

Through this method of financing, the acquiring

company gets a loan from the target company to
complete the sale. This is achieved through: seller’s
note - seller (target) allows the buyer (acquirer) to
pay part of the transaction price at a later date but
accruing interest; earn-out - if the seller achieves a
high financial performance target, then the buyer
will pay out a larger sum; delayed payments - the
buyer will pay at a later date but for a higher price;
consulting agreement - regular payments to the
seller that pays the money over time.

Pros
Gives the acquiring company more flexibility, as
the loan can be paid to the target company at a
later date.
Cons
VTBs are often more expensive than normal
loans from external sources, as the target
company will ask for alternative methods of
payment, which brings a further risk, therefore a
higher interest.
PAGE | 09 THE BUSINESS UPDATE |

Leveraged Buyout (LBO)

This is also a mix of debt and equity, but it is largely made up of

debt, from 50-90%. LBOs are mainly used when the acquiring
company will be looking to take over the target company to
change the management of the target. LBOs are suitable for
businesses that are in their growing stage, have strong cash flow
and a strong asset base to be used as collateral. In an LBO, both
the assets of the acquiring and the target company are given as
collateral, should the borrower default.

Pros
By using a highly leveraged loan, the acquirer stands to make
a better return on their investment, compared to undertaking
the whole investment using the
Cons
Leveraged loans are often high-risk, and so will result in a
high rate of interest.

In order for the borrower to keep up with loan payments they need
to already have a very strong financial health in case of an
economic downturn, so this isn’t really suitable for new companies
and startups.

Stock Swaps

The acquiring company will offer owners of the target company

shares in the acquiring company/new merged entity in exchange
for their shares in the target.

Pros
Shareholders in the target company could see the value of
their investment go up in the long-run if the acquiring
company makes an efficient use of the target company’s
resources and the acquirer sees an increase in share price.
Cons
If the acquiring company fails to properly integrate the target
company and to make use of their resources, the share price
will fall, and so the shareholders of the target company will
see the value of their investment fall.
| THE BUSINESS UPDATE PAGE | 10

Equity Financing

The acquiring company will start selling shares in its

own company in order to raise the capital necessary
to finance the deal.

Pros
The capital raised does not need to be paid back
to investors, the investors gain ownership of the
company and dividends rather than being paid
back.
Money does not need to be paid back to
investors in case the company fails.
Cons
The acquiring company loses control in the way
that the company is being run by offering shares,
and will have to ask investors before making big
decisions.
The acquiring company might end up paying
more in dividends to investors compared to what
they would have paid back in loan payments.

Selling Assets

The acquiring company will sell assets in order to

raise the capital necessary to buy a controlling stake
in a target company.

Pros:
The acquirer does not need to pay back the
capital needed to purchase the controlling stake,
as they would have done if they raised money
through debt.
Cons:
The acquirer has maximum coverage should the
deal not succeed, and will have lost all of the
capital raised through selling their assets, along
with the assets themselves.
PAGE | 11 THE BUSINESS UPDATE |

RECENT M&A DEALS

Written by: Keir Galloway Throssel

Details of Story:
In May 2020, the UK’s largest mobile network O2, announced
its intention to merge with Virgin Media to strengthen their
positions against competitors BT and Sky, and provide funds
for 5G investment. This is not O2’s first attempt to remedy
rising debt, with a sale to CK Hutchison (owner of Three)
blocked by the European Commission on competition grounds
Virgin & O2 in 2015, and an IPO deterred by Brexit uncertainty.

Wider Factors:
With increasing competition in the sector, offering packaged
deals (using O2’s mobile network and Virgin Media’s TV and
broadband services) will be attractive to customers seeking
simplicity and may give the merged company an edge.

Details of Story:
Amazon’s £442m investment into Deliveroo was approved by
the CMA as the only way to ensure Deliveroo would remain
solvent (with a number of the restaurants it works with closing
due to COVID-19). This merger could see a combination of
the companies’ ultra-faced UK delivery network, providing the
opportunity to undercut competitors such as Uber Eats and
Amazon & Just Eat Takeaway.

Deliveroo Wider Factors:

Amazon’s customer-centric model could see the introduction
of productivity mechanisms with penalties for late deliveries
(similar to the timers in Amazon’s warehouses) which could
erode the flexibility that gig economy workers seek. Also, MPs
have expressed concerns over what some believe is
Amazon’s attempt to harness additional customer data.
| THE BUSINESS UPDATE PAGE | 12

RECENT M&A DEALS

Details of Story:
Takeaway left the UK market in 2016 citing intense
competition, but this £5.9bn merger aimed to solidify both
companies against competition so well, the Competition and
Markets Authority called it into question. The merger was
ultimately approved, and the two companies were permitted to
combine their business which equals £6.6 billion worth of
Virgin & O2 takeaway orders annually. It is worth noting this will likely
increase considering the COVID-19 lockdown.

Wider Factors:
There has been a lot of activity and consolidation in the food
delivery sector, with Amazon’s investment in Deliveroo
andJust Eat Takeaway’s recently announced intention to
acquire US-based Grubhub for £5.75bn.

Details of Story:
Plans to create a global law firm with revenues of £2.4bn
emerged in April 2018 but were eventually called off in
September 2019. Negotiations faltered over the valuation of
the two businesses (especially considering the fluctuations in
the price of sterling and the dollar as a consequence of
A&O Brexit), governance and how to match the different
remuneration structures.
O'Melveny
Wider Factors:
This attempted merger highlights the difficulty for UK firms to
break into the US legal market (a challenge US firms do not
seem to experience when establishing a UK presence).
Further failed attempts include Ashurst’s planned merger with
Sidley Austin (2013) and Freshfields’ combination with
Debevoise & Plimpton (2002). Although it is not impossible,
with Hogan Lovells (2010), Norton Rose Fulbright (2017) and
BCLP (2018) examples of successful US-UK mergers.
PAGE | 13 THE BUSINESS UPDATE |

ROLE OF THE CMA

Written by: Maciko Chan

Who is the Competition’s Market Authority (CMA)?

The CMA is an independent and non-ministerial regulator of

the UK government, enforcing competition and consumer law.
They came into effect on the 1st of April 2014. It aims to
prevent large companies from abusing their dominant market
position such as introducing unfair pricing and exploiting
consumers.

Role of CMA in M&A

The role of CMA is to prevent any mergers or acquisitions that

may disproportionately increase the market share of the
respective acquirer or the new merged company, placing
them in a dominant market position. They identify and
evaluate which M&A will significantly hinder consumer choice
and substantially lessen market competition.

For example, past CMA investigations have stated that

mergers may inhibit innovation and are ineffective as they do
not have to compete with other competitors in the
marketplace. Not only will it harm consumers and competition
in the market, the country’s economy will also be affected due
to inelastic demand and diseconomies of scale.

Examples where the CMA have blocked past acquisitions

include:

JD-Footasylum decreases consumer choice for discounts and

lessens the quality of customer service.
Asda-Sainsburys substantially lessens variations, quality of
products and increased prices. Consumers will also have
fewer choices for online groceries shopping.
Sabre-Farelogix supplies technology to airlines in selling
tickets and add-on flight services. The CMA held that this
acquisition lessens technology innovation and will harm
airlines, travel agents and UK travellers.
| THE BUSINESS UPDATE PAGE | 14

UK M&A SWOT
ANALYSIS
Written by: Annie Tam

M&A in the UK involves national M&A and cross-border M&A from (outbound) and into
(inbound) England. The UK has traditionally been an active place for M&A activities.
Evern with the political uncertainty of Brexit, the UK M&A market has been demonstrated
to be resilient.

Strengths

Point 1: Dealmaking as a tool for companies to bolser revenues and profitability.

Think of the various purposes of M&A. A company uses M&A activities to achieve the
following strategic objectives:
Profitable growth to increase business breadth or depth through revenue growth
Skill strengthening to acquire the necessary talent to remain competitive, including
personnel, technology, capability, geographies
Portfolio management to maximise existing and evolving capabilities, reduce risks or
reposition a business
Defensive action to prevent potential takeover attempts
Opportunistic posture to capitalise on a unique market/ competitive opportunity or a
developing business formula
Globalisation: to expand market share and sales in international venues
PAGE | 15 THE BUSINESS UPDATE |

Strengths

If you can think of a reason that the takeover/merger

could achieve the above objectives, and how UK
companies could provide the above objectives. It
shows your understanding why the UK and its
companies make an attractive investment.

Point 2: For the short term, there may be fewer

domestic buyers to compete with, which creates the
perfect condition for overseas cash rich buyers.

Point 3: Talents
A lot of the relevant professionals on the buy-or sell-
side are based in London. Hence, even when UK
M&A itself is quiet, the M&A professionals based in
London still tend to be busy dealing with global or
pan-European deals (whether or not the relevant
assets are wrapped in a UK corporate).

Point 4: English and New York law continues to be

popular with clients, which drives the London market.

Active sector: telecoms, media and technology

sector has been particularly active and that is likely
to continue to be the case for 2020. We are entering
the fourth industrial revolution! Digitalisation of all
industries continues apace and sees no sign of
slowing down. These are the strengths of our M&A
market.

Conclusion: Slower periods as a result of political

and economic uncertainty have been fairly short-term
trends and dealmakers have quickly returned to
action once markets settle.
| THE BUSINESS UPDATE PAGE | 16

Weakness

Coronavirous meant that companies have to change

their corporate strategy. M&A activities are no longer
on top of their priorities. This is causing deals to
either fall through or left in limbo and hence you are
seeing stats that say M&A activities are slowing
down.

Point 1: Volatility
The volatility in the market has delayed the mergers
and acquisitions that almost all investors want to see
across the shale patch. Cumulative impact of the
lack of confidence around high valuation, of
regulatory scrutiny, of macroeconomic uncertainty
and the coronavirus are making people more
conservative.

Point 2: The rest of 2020 will be characterised more

by insolvencies than M&A.

Point 3: Competition restrictions

It’s taking longer for a competition review to be
completed, which is deterring some buyers from
making moves.

Point 4: Brexit uncertainty! But, principally value and

strategic imperatives will often trump political worries.

Quick facts:
January 2020 marks the quietest month for M&A
activity in almost 7 years (since April 2013)

What this means:

We will have a quieter summer than usual at best
Inorganic growth in the short to medium term is
unrealistic.
PAGE | 17 THE BUSINESS UPDATE |

Opportunities Therefore, while there is still a degree of

uncertainty and volatility in the global
The wind keeps blowing and we keep buying hot markets, there is scope for such
girl summer dresses that we will only wear for opportunistic acquisitions, especially by
once even during a pandemic. Chinese buyers with the wider Asian region
emerging sooner from the COVID-19
Here are the sectors that are less affected by restrictions.
COVID: Technology, energy, goods, online retail,
public sector, healthcare, business services, Point 3: Regulatory change leading to a
financial services and industrials sectors. sector becoming more attractive for
consolidation.
Big story in Telecom: The Virgin Media and O2
merger. For instance, in renewable energy. The UK
This could trigger a broader industry shake-up as renewables planning applications are at an
rivals consider their options. This deal will trigger all-time high. The Department for Business,
a ripple effect on the UK market: Vodafone, Energy & industrial Strategy has launched a
Three, Sky and TalkTalk will all be assessing consultation proposing that new onshore
their positions and further dealmaking can’t be wind and solar will be able to apply for
ruled out. Contracts for Difference (CfDs) Scheme. It
was blocked for four years previously!
Point 1: Brexit
Brexit poses opportunities for overseas investors Principally:
seeking to capitalise on cheaper UK assets
The weakening pound means that UK valuations It is too soon to draw a conclusion on the
begin to look attractive to overseas buyers. year’s activity based on a single month of
announced deals. Additionally, deal
Point 2: Other regions recovering quicker announcements are not spread equally
For instance, China is two months ahead of the across the year.
west in easing lockdowns. Opportunities for M&A
activities involve buyers with stronger balance Shocks to the market do give rise to
sheets and cash saved to be used in challenging opportunities - it’s more of a question of
situations. This means cash rich overseas buyers knowing where they are and being prepared.
will come to the fore as a result.
Where do you see opportunities for
inorganic growth lie?
| THE BUSINESS UPDATE PAGE | 18

Threats

Point 1: Recession
The UK, along with much of the rest of the work, is thought to
be heading into the worst recession for decades. This means
there will be an increased likelihood of businesses entering
into insolvency proceedings, instead of seeking strategic
growth through M&A.

Emerging markets and Asia are experiencing a decrease in

output, which could adversely affect the US and have wider
consequences for the global economy and M&A activity.

Point 2: Brexit
Br-what?
COVID has delayed Brexit deal negotiations and postponed
the clarity that the market craves. In addition, some
dealmakers and back-office operations have relocated to the
continent or Ireland, threatening the M&A activities in the UK.

Point 3: Uncertainty
Geopolitical uncertainty: US China trade war, tension
between China, US and Australia. These have all shakened
confidence among board members and executives in blue-
chip companies.

Point 4: Stock markets and raising finance

Global stock markets have slid over, wiping out their gains
for the year amid fears over the coronavirus.

Leveraged buyers and Private Equity houses are paused as

they struggle to raise finance.

Even those houses with plenty of capital to deploy are finding

it problematic to obtain investment approval. Given the
volatility and uncertainty presenting a reliable profitability /
run rate picture for most businesses is currently extremely
difficult.

Hedge funds that bet on the completion of pending mergers

and acquisitions are nursing heavy losses, as the
coronavirus outbreak wreaks havoc in global markets and
puts many deals in jeopardy.
PAGE | 19 THE BUSINESS UPDATE |

Threats

Point 5: Government interventions in foreign Following the outbreak of the pandemic, the
direct investment trend towards protectionism has only
increased. Governments have sought to
Quick facts: move quickly to protect businesses from
The National Security and Infrastructure opportunistic acquisition by foreign buyers.
Investment Review in October 2017 introduced
sensitive sectors. What this means:

The UK government has been consulting on a The chances of a ‘foreign’ buyer achieving a
new regime under which it would have increased hostile offer for a UK company appear
powers to scrutinise M&A transactions on increasingly remote. Although there are no
national security grounds. enacted foreign direct investment rules, the
Enterprise Act and the unpredictability of
Other grounds that may put FDI or a M&A deal government means even recommended
on halt include, financial stability, media plurality, deals may need early government buy-in.
standards (these are known as public interest
grounds) The proposed system would be based on
voluntary notifications, with the government
There are special public interest grounds as well. having powers to call in transactions for
They concern the development/production of review where it has a reasonable suspicion
military or dual-use items, certain computing that the transaction may give rise to a risk to
hardware technologies and quantum national security. This could affect deal
technologies (the “sensitive sectors”), or media timetables and on some deals, depending
companies with a 25% or more share of their on the target sector, increase execution risk.
relevant media (e.g., newspapers or
broadcasting) Effects:
Public companies – especially large ones
Why: Politicians in the UK could not see the that are subject to a takeover by a foreign
upside in supporting M&A unless it is a UK acquirer – will be subject to increased
company acquiring a foreign company. This is scrutiny from politicians.
making big ticket M&A harder especially for
foreign buyers.
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