UK M&A: the fence of the realm

We all value security. Allied Universal, for example, is paying £3.8bn in cash for G4S following an auction. The US group and its UK peer hire out security guards. The staff of the Investment Security Unit, a nascent arm of UK government, will be sentinels too, vigilant for purchases of important UK assets by unfriendly regimes, notably China. Wide, vague legislation will make their job a tricky one.

They face invidious comparisons with the Takeover Panel, the independent body that oversees UK takeovers. The G4S auction is an example of its handiwork. This brought an acrimonious takeover battle — Canada’s GardaWorld was the underbidder — to a relatively swift and harmonious end.

City types are in a ferment over the new takeover regime the ISU will manage. The enabling National Security and Investment Bill is in its final stages in parliament. Many aspects of its implementation remain unclear.

Politicians say critics ignore the resurgence of China and Russia as aggressive world powers. Acquisitions are one way such powers gain technological advantage. Most countries already have strong protections, notably the US through its Cfius system.

Clearly a bid from Huawei for UK telecoms group BT would be blocked. The difficulty for the City is that clearance may be required for almost any purchase of shares that could influence a company of any size active in 17 broadly-defined sectors.

The ISU will hope to police its beat as deftly as the Takeover Panel. This superintends a process according to a lengthy rule book. More taxingly, the ISU will determine outcomes — or help ministers do so — on minimal precedents. Politicians and bureaucrats are, meanwhile, exposed to media campaigns against foreign takeovers that low-profile panel officers can ignore.

The new defenders of the realm will be bombarded with precautionary requests for guidance and clearances. The flood should abate as common understandings emerge. The real test of the new regime is whether it can safeguard national security with minimal controversy. The best security guards are invisible.

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