Cross border mergers and acquisitions remain a vital driver of growth for UK businesses. International investment brings capital, expertise and access to new markets. At the same time, governments are paying closer attention to who owns and controls strategically important companies and assets. In the UK, the National Security and Investment Act 2021 has reshaped the legal landscape for cross border M and A.
For buyers and sellers alike, the regime introduces new risks, new obligations and, in some cases, new deal dynamics. Transactions that would once have completed quietly can now be subject to mandatory notification, government scrutiny and potential intervention. This article explains how the National Security and Investment Act affects cross border M and A, highlights common pitfalls, and offers practical guidance for navigating the process.
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The National Security and Investment Act in overview
The National Security and Investment Act 2021 came fully into force in January 2022. It gives the UK Government wide powers to review and, where necessary, intervene in acquisitions that may pose a risk to national security. The regime applies to both UK and non UK investors, although cross border transactions are more likely to engage the policy concerns that underpin the legislation.
The Act created a standalone investment screening regime. It operates alongside, but is distinct from, merger control under competition law. A transaction can therefore raise issues under both regimes, each with its own process and timetable. This dual track regulatory environment is now a routine feature of complex cross border M and A.
The Government’s powers include the ability to impose conditions on a transaction, require changes to governance or information flows, or in extreme cases block or unwind a completed deal. The implications for deal certainty are significant.
Which transactions are in scope?
The regime applies to a broad range of acquisitions of control over entities and assets. Control can arise through share purchases, voting rights, or the acquisition of material influence. It is not limited to the acquisition of entire companies. Minority investments can be caught where they confer sufficient influence.
There are two principal routes into the regime.
Mandatory notification sectors
Acquisitions in 17 specified sectors must be notified to the Government before completion where certain control thresholds are met. These sectors include areas such as advanced materials, artificial intelligence, defence, energy, communications, data infrastructure and transport. Many cross border transactions in technology, manufacturing and infrastructure will fall within this category.
Failure to notify a notifiable transaction renders it legally void. This is a serious consequence, with potential civil and criminal penalties for parties who proceed without approval.
Voluntary notification and call in powers
Outside the mandatory sectors, parties can choose to notify transactions voluntarily if there is a potential national security risk. The Government also has the power to call in transactions for review for up to five years after completion, reduced to six months where the Government becomes aware of the deal.
For cross border M and A, this creates a degree of residual risk. A transaction may appear benign at the outset but later attract scrutiny, particularly if the target operates in a sensitive supply chain or holds valuable data.
National security risk in a commercial context
The concept of national security is deliberately broad. It is not confined to traditional defence related industries. In practice, the Government has shown interest in transactions involving:
- Critical national infrastructure
- Sensitive data and communications networks
- Dual use technologies
- Supply chains that support defence or emergency services
- Businesses with close ties to government contracts
For overseas buyers, particularly those from jurisdictions perceived as higher risk, the scrutiny may be more intense. However, the regime is country neutral on its face. Friendly states are not exempt. The focus is on the nature of the asset, the degree of control being acquired, and the potential for influence over sensitive capabilities.
Deal planning and timing considerations
One of the most practical impacts of the National Security and Investment Act is on transaction timetables. The review process can introduce additional stages and uncertainty into deal planning.
Once a mandatory or voluntary notification is submitted, there is an initial review period. If the Government decides to call in the transaction for a full assessment, a more detailed review follows. This can extend the overall timetable by several months.
For cross border deals, this can complicate coordination with other regulatory approvals, such as foreign investment screening regimes in other jurisdictions. Buyers and sellers must factor this into long stop dates, financing arrangements and conditionality in transaction documents.
There is also a strategic element. In some cases, early engagement and a well prepared notification can reduce the risk of delay or adverse outcomes. In others, the prospect of scrutiny may influence deal structure, such as the level of control acquired at completion.
Key legal risks for buyers and sellers
The regime creates distinct risks for both sides of a transaction.
Risk of void transactions
Where mandatory notification applies, completing without approval means the transaction has no legal effect. This can create profound uncertainty over ownership and control. Rectifying the position after the event can be complex and costly.
Conditions imposed on the deal
The Government can impose remedies to address perceived risks. These may include restrictions on access to information, requirements to retain UK based management, or obligations to maintain certain operations in the UK. While such conditions may preserve the deal, they can affect the commercial rationale and future flexibility of the business.
Impact on valuation and deal certainty
The possibility of intervention can affect valuation. Buyers may price in regulatory risk or seek to shift risk through conditionality and termination rights. Sellers may face reduced competitive tension where some bidders are deterred by the regime.
Confidentiality and disclosure issues
The notification process requires the provision of detailed information about the transaction, ownership structures and the target business. Managing confidentiality, particularly in competitive auction processes, requires careful handling.
Practical steps for navigating the regime
Early assessment is critical. Parties should identify at an early stage whether the target operates in a mandatory notification sector or whether the transaction may raise national security sensitivities. This assessment should form part of the initial legal due diligence.
Clear allocation of risk in transaction documents is also important. This includes conditions precedent relating to National Security and Investment Act clearance, long stop dates that reflect realistic review periods, and provisions dealing with remedies or undertakings that may be required.
Engagement with advisers who understand both the legal framework and the practical approach of the Investment Security Unit can make a material difference. Well structured notifications, supported by clear explanations of the commercial context and any proposed safeguards, are more likely to progress smoothly.
For sellers, there is value in preparing the business for scrutiny. This may include mapping sensitive contracts, data flows and supply chain dependencies so that information can be provided efficiently if required.
Interaction with other regulatory regimes
Cross border M and A often involves multiple layers of regulation. The National Security and Investment Act does not operate in isolation. Transactions may also require clearance under UK merger control, sector specific regulatory approvals, and foreign investment screening regimes in other countries.
The sequencing of these processes can be complex. Conditions imposed in one jurisdiction may affect the approach taken in another. Coordinated regulatory strategy is therefore an increasingly important part of deal execution.
The role of legal advisers in cross border M and A
The evolving nature of the national security regime means that legal advice is not simply about compliance. It is about strategy. Advisers can help clients to assess risk, shape deal structures, manage stakeholder expectations and navigate negotiations with regulators.
Blackstone Solicitors advises clients across England and Wales on cross border M and A, foreign investment screening and regulatory risk. We work closely with corporate finance advisers and international counsel to support transactions from initial structuring through to completion and integration.
Conclusion
The National Security and Investment Act has added a new dimension to cross border M and A in the UK. While the regime is rooted in legitimate public policy concerns, it has real commercial consequences for buyers and sellers. Transactions now require more careful planning, greater regulatory awareness and, in some cases, a recalibration of expectations around timing and certainty.
For businesses and investors who understand the framework and engage with it constructively, the regime need not be an obstacle. With early assessment, thoughtful structuring and the right advice, cross border deals can still be executed successfully. The key is to treat national security screening as a core part of the transaction, not an afterthought.
At Blackstone Solicitors, we guide clients across England and Wales through every stage of transactional negotiation, providing practical, commercially-focused advice to safeguard your interests.
We have a proven track record of helping clients deal with the legal implications of corporate law. We will guide you diligently and ensure all checks are carried out swiftly and efficiently and we firmly believe that with the right solicitors by your side, the entire process will seem more manageable and far less daunting. You can read more about the range of corporate services we offer by clicking here: https://blackstonesolicitorsltd.co.uk/corporate-legal-services/
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Disclaimer: This article provides general information only and does not constitute legal advice on any individual circumstances.
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