Following the publication and consultation on a green paper earlier this year the UK Government has now published new takeover rules, adding new thresholds to the relevant provisions of the UK Enterprise Act giving the Secretary of State (SoS) additional powers to scrutinize mergers taking place after July 11, 2018. These powers are based on public interest in transactions that raise national security concerns and in which the Government would have otherwise not been able to intervene. This is part of the UK Government’s wider review of national security and infrastructure investment review which will bring additional legislative changes in future. The Government’s stated reasons for the new rules include technological and economic changes as well as a changing national security threat which meant that thresholds were no longer effectively safeguarding the UK’s national security in all areas of the economy. In addition to giving the SoS broader grounds to intervene the additional rules also add a new jurisdictional test for merger review and as such apply to the UK Competition and Markets Authority (CMA) which is responsible for reviewing such mergers on competition law grounds.

The “Relevant Enterprises” to Which the New Rules Will Apply

The UK merger regime remains a voluntary regime. Merger notification requirements are left to the parties’ self-assessment. On the basis of the existing rules the CMA will only investigate transactions if it has reasonable grounds to suspect that a transaction may give rise to a relevant merger situation, and if the jurisdictional thresholds are met. The latter are met if the target’s annual turnover exceeds GBP70 million or where share of supply of good or services increases to over 25% as a result of the merger. These rules remain unaffected but will hitherto only apply to companies other than “relevant enterprises.”

The new rules introduce a new definition of “relevant enterprise” into the share of supply test which targets smaller companies which hold a 25% share of supply of goods or services prior to a merger including those that sell “military or dual-use goods which are subject to export control, computer processing and units, and quantum technology”. This applies only to the products and services of possible merger targets and those active in these markets will fall under a new jurisdictional threshold. The new thresholds are met if the relevant enterprise and has an annual turnover of GBP1m (instead of GBP70million) and if its share of supply or purchase of goods or services, i.e. those goods or services that qualify the company as relevant enterprise, before the merger in the UK is at least 25%.

According to Guidance on the notion of “relevant enterprise” published by the Department of Business, Energy & Industrial Strategy (BEIS) “relevant enterprises” are those that are active in

  • the development or production of or which hold relevant information on items for military or military and civilian use (‘dual use’);
    • This includes arms, military and paramilitary equipment and generally those (but not all) that are subject to strategic export controls and included in Strategic Export Control Lists specifically excluding the EU Human Rights List,
  • the design and maintenance of aspects of computing hardware;
    • the ownership, creation or supply of intellectual property relating to the functional capability of: i. computer processing units; ii. the instruction set architecture for such units; iii. computer code that provides low level control for such units
    • the design, maintenance or provision of support for the secure provisioning or management of: i. roots of trust of computer processing units; ii. computer code that provides low level control for such units.
  • the development and production of quantum technology, in particular
    • quantum computing or simulation;
    • quantum imaging, sensing, timing or navigation;
    • quantum communications; and
    • quantum resistant cryptography.

The guidance provides further detail and any remaining questions can be raised with the BEIS, not however the CMA.


The new rules will affect buyers of smaller UK businesses considered to be relevant enterprises as they could now trigger a public interest intervention by the SoS. The existing public interest intervention so far gave the SoS the ability to intervene in cases where jurisdictional thresholds were not met or where there was no scrutiny for competition concerns on grounds relating to the national security, media plurality and financial stability. So far an intervention was made in only very few cases which the CMA was then required to investigate.

If you are considering a transaction involving a relevant enterprise active in goods for military use, computer hardware or quantum technology you are well advised to conduct a careful assessment of the application of the new rules to your transaction, and if so test the waters with the Government first before implementing a merger in order to be able to address any concerns early on. We do not expect significant changes in relation to the assessment in front of the CMA, however, more interventions by the SoS will mean more investigations by the CMA. More changes will likely follow from the ongoing broader national security review. And while a true Brexit would give the UK Government more freedom on its merger policy any restrictions and interventions will likely be mirrored by the UK’s future trading partners affecting UK businesses investing in companies abroad.