In October 2017, we reported that the UK Government had launched a consultation on various proposed changes to the UK’s merger control regime and beyond. The purpose of the proposed changes was to prevent investments and takeovers in the UK from raising national security concerns.

That consultation was split out into:

  • short-term proposals, which contemplated changes to the UK’s merger control regime; and
  • longer-term proposals, which envisaged more significant powers for the Government to intervene in certain kinds of investment.

The Government has now published its response to the short-term proposals set out in the consultation. The key points are as follows:

  • Turnover test. At the moment, a merger is within the UK’s merger control regime if the UK turnover of the business being acquired (the target) exceeds £70 million.The Government has confirmed it will implement its proposal to reduce this threshold to £1 million for mergers of businesses within certain specified sectors.
  • Share of supply test. Currently, a merger is within the UK’s merger control regime if the combined share of supply of products or services by the target and the buyer would move to above 25%, or if the merger would increase a combined share that already sits above 25%.Again, the Government has confirmed it will implement its proposal to add an additional share of supply test for mergers in certain specified sectors, namely where the existing share of supply of the target alone is 25% or more. This will supplement (and not replace) the existing share of supply test.
  • Specified sectors. The new thresholds will apply only to mergers in particular sectors. These are military and “dual-use” products (as set out in certain lists included in the UK’s Strategic Export Control Lists), multi-purpose computing hardware and quantum-based technology.

The result is likely to be that a significant number of mergers in these sectors will now fall within the UK’s merger control regime and come under the scrutiny of the Competition and Markets Authority.

The Government has laid the order amending the “share of supply test” before Parliament. It intends to lay the order amending the “turnover test” in due course. Both orders will come into effect at the same time, which is likely to be 28 days after they are approved by Parliament.

The Government is considering responses to its longer-term proposals and will respond to them in due course.