As such, US (and other non-UK) investors and, more generally, US (and other non-UK) transaction participants, should be live to the implications of this regime when entering into international transactions with a potential UK angle, particularly if these fall within one of the 17 sensitive sectors that require a mandatory pre-notification for share acquisitions. As previously highlighted, the NSIA has a broad extraterritorial reach: although UK target companies and UK-based target assets are a priority, the UK regime also captures international transactions where the target, despite not being either based in the UK or having UK subsidiaries, (i) has activities (e.g., an R&D facility) in the UK, (ii) supplies goods or services in the UK (e.g., through distributors to UK customers), or (iii) is or has an asset used in connection with activities carried out in the UK and/or in connection with the supply of goods or services to people in the UK. Notable examples include WindAcre/Nielsen, as well as a number of recent deals initiated under the NSIA’ predecessor regime, namely Parker-Hannifin/Meggitt, Cobham/Ultra Electronics, and Nvidia/Arm. There are many examples of transactions involving US buyers which have recently been called in and/or closely scrutinised by BEIS. US (as well as other non-UK) transaction parties 6 should carefully consider the potential UK nexus of their transaction.4 In fact, even a UK-to-UK deal may trigger a filing. Experience shows that acquirers from close allies such as the US, France or Israel may still give rise to a UK national security issue where the target business is engaged in sensitive activities. Although, somewhat unsurprisingly, the only deal having been blocked so far concerned a Chinese acquirer, transactions undertaken by acquirers headquartered in countries that are close allies of the UK are not immune from close scrutiny. Nationality does not determine outcome. Nevertheless, as the body of published cases expands and some insight on current and recent cases becomes available in the legal press, the following key takeaways on the enforcement have emerged: This somewhat limits predictability and certainty. Also, compared to merger control decisions, final decisions that are published are scant as the government provides no reasoning for its decision. 3 Clearances and other procedural decisions are not published (see also our previous Advisory). Publication of NSIA decisions are limited to final orders imposing conditions, unwinding, or blocking a transaction. 2 The decision was adopted in the same week that BEIS accepted undertakings by US-listed Parker-Hannifin in respect of its acquisition of Meggitt. Interestingly, this did not involve a share acquisition of a company (which would have required a mandatory pre-notification), but a licensing arrangement concerning sensitive technology which was notified voluntarily. The prohibited transaction involved the acquisition by Chinese company Beijing Infinite Vision Technology of IP developed and owned by the University of Manchester. In this advisory we take stock of the emerging practice and outline key takeaways for businesses, including US transaction parties, involved in acquisitions in and outside of the UK. 1 In other cases where the government has intervened so far enforcement action involved imposing conditions on the acquirer. On 20 July, the UK government prohibited for the first time a transaction under the new National Security and Investment Act 2021 (“NSIA”).
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