The two deals forcing Britain to show its hand on M&A
Britain’s M&A identity crisis
A global Britain that is open for business has been the mantra of Boris Johnson’s government as it has tried to define its ambitions after Brexit.
Yet in a post-Covid world, Johnson and his team — which includes Thatcherite free-market ministers such as business secretary Kwasi Kwarteng — have recognised the importance of self-reliance and economic sovereignty.
The current spate of takeover bids for listed UK companies is shaping up to be a key test of which of these philosophies will prevail, the FT’s Sylvia Pfeifer reports.
Critics say Britain’s leaders have for too long adopted a case-by-case approach to takeovers, one that hasn’t always been consistent.
And they barely seemed to notice a flood of acquisitions of companies such as security group G4S, motor recovery specialist the AA, insurers RSA and LV= and potentially now Wm Morrison, whose roots stretch back to a 19th-century Yorkshire market stall.
Two takeovers in particular, however, pose more difficult questions.
There’s the proposed £2.6bn acquisition of Ultra Electronics by Cobham, which is owned by the US private equity group Advent International, and Nvidia’s planned $54bn takeover of British chip designer Arm. (Also coming down the tracks is a possible bidding war for the aerospace and defence group Meggitt.)
Kwarteng has announced a formal investigation into the takeover of Ultra, a key supplier to the Royal Navy. The UK has referred the Arm deal for a national security review, and must now decide whether to open an in-depth probe based on both national security and competition concerns after the Competition and Markets Authority’s chief Andrea Coscelli said last week that the deal risked “stifling innovation” and causing higher prices.
This approach has made the British government’s response to a foreign takeover of strategic national assets difficult to predict.
When SoftBank agreed to buy Arm after the country’s 2016 vote to leave the EU, politicians hailed it as a vote of confidence in post-Brexit Britain. When Advent bought Cobham, the UK asked for commitments, but those pledges didn’t prevent the private equity firm from selling off more than half of the Cobham business within 18 months.
Two interventions don’t make an industrial policy. But with Johnson’s government looking to tighten its scrutiny of takeovers via the National Security and Investment Act, due to come into force in January, they might offer some clues.