The UK government is introducing changes to merger control rules to extend jurisdiction to review competition and national interest aspects of transactions affecting businesses which have activities in the technology and defence sectors.

The UK government is to introduce legislation lowering the jurisdictional thresholds which must be satisfied in order for the Competition and Markets Authority to intervene on competition grounds, or for the government to intervene on national security grounds, in mergers, acquisitions and some joint ventures in the following defence and technology sectors:

  • The development or production of items for military, or military and civilian, use (‘dual use’)
  • The design and maintenance of computer hardware relating to computer processing units
  • The development and production of quantum technology

For deals in these sectors, jurisdiction will now be established where:

  • the acquired business has a minimum annual UK turnover of £1 million (reduced from the usual £70 million);
  • the merger results in the creation of, or increase in, a combined share of 25 per cent or more of sales or purchases of the relevant goods or services in the UK (i.e., the existing share of supply test); or
  • the acquired business alone has a share of supply of 25 per cent or more of the relevant goods or services in the UK (thus, the usual requirement that the merger leads to an increase in share does not apply).

Notification of deals satisfying these reduced jurisdictional thresholds remains voluntary, but parties who do not notify or make their deals conditional on clearance do so at the risk of action being taken by the authorities, whose powers include ordering divestments and ordering the parties to separate acquired businesses during any review period. It nevertheless remains open to parties to a smaller transaction to take their own view that the deal does not create any competition or national security issue and therefore to choose not to incur the burdens of compiling and submitting a notification, and obtaining clearance.

Note that it is not a requirement under the £1 million turnover test that the entire turnover of the target be derived from one of the sectors mentioned above. The deal will be caught if the target has overall UK turnover of £1 million or more, even if only a small portion of turnover is derived from those sectors.

In addition to the new changes, the Special Public Interest Regime remains in force unchanged, allowing the government to intervene where no turnover or share of supply tests are met, in mergers that involve government contractors who hold or receive confidential defence-related information and also certain newspaper/broadcasting businesses.  There may well therefore be an overlap so that some deals will be caught by both regimes.