UK Public M&A Monthly Activity Update: November 2023

Firm Offers breakdown this month:

Year to date breakdown:

November 2023 Updates:

Review of investment screening regime in National Security & Investment Act

The government has published a Call for Evidence on the scope and implementation of the UK’s National Security and Investment (NSI) regime, which governs screening of transactions on national security grounds for both foreign and UK investors.

The National Security and Investment Act 2021 introduced a new framework for the review of transactions and investments on national security grounds in the UK with effect from 4 January 2022. Since entering into force, the UK has seen significantly more filings than many other foreign direct investment (FDI) regimes and concerns have been raised by investors and advisors that the regime places disproportionate burdens on companies and investors and operates without sufficient transparency.

The government is inviting comments on the operation of the regime to date, with the stated aim of making it “as pro-business and pro-investment as possible”.

The Call for Evidence makes clear that the government is not currently considering any changes to primary legislation, such as changing the shareholding thresholds for mandatory notification. However, it asks for views on various proposals, including:

• introducing targeted exemptions from the mandatory notification obligation, for example group reorganisations;
• clarifying and refining the definitions of specified activities in a number of the sensitive sectors;
• expanding and updating the guidance for investors; and
• improving transparency in the decision-making process.

The deadline for responses to the Call for Evidence is 15 January 2024. The government has indicated that it may subsequently undertake more detailed consultation on specific measures or proposed legislative changes, depending on the responses received.
For further information on the Call for Evidence, see our Competition Notes blog post.

November 2023 Insights:

As a result of the high interest rates and inflationary pressures seen throughout 2023, the financing arrangements used by bidders have changed compared to 2022. Given this macroeconomic environment, it is unsurprising that the number of bids which featured an element of debt financing have decreased. Conversely, the number of bids which involved an equity subscription to the bidco have almost doubled compared to 2023, and shareholder loans have been included on three times as many offers. If interest rates begin to fall as forecast, it will be interesting to see if the popularity of debt financing increases again

Useful links

• Herbert Smith Freehills Takeovers Portal.
• Herbert Smith Freehills Public M&A Podcast Series.
• The Takeover Code.
• The Takeover Panel’s Disclosure Table (detailing offeree companies and offerors currently in an offer period).