Guest Blog|How will UK Government intervention impact M&A in life sciences?

Author: Christine Phillips, Corporate Finance Partner, Fieldfisher

Recently the UK has put measures in place which signify a growing move towards protectionism across the EU.

Back in June 2018, the UK Government introduced changes to the Enterprise Act 2002 to protect national security, which mostly affected mainstream tech companies by allowing the UK Government to intervene in acquisitions. However, due to further changes made to the Act in June of this year, the scope was broadened for tech businesses and also extended the UK Government's power to intervene in mergers to combat and mitigate public health emergency (previously the public interest considerations included national security, media plurality and financial security only) now means that there is likely to be an impact on the life sciences sector.

The introduction of the new public health category will capture businesses such as those conducting vaccine research and development, vaccine or COVID-19/antibody testing production, PPE or ventilator manufacture, ISPs or those in the food supply chain. The amendment is intended to enable the UK Government to intervene where COVID-19 has caused financial problems and therefore makes companies susceptible to foreign takeovers.

These changes indicate that the UK Government may seek to intervene more in life sciences acquisitions and also those involving cryptographic technology, technology hardware, AI, cybersecurity and critical infrastructure networks, particularly as the turnover threshold is now so low for these businesses (£1 million [$1.3m] or more, reduced from £70 million [$92m]). This could potentially result in the UK Government requiring measures to be implemented such as post acquisition covenants or ringfencing of information and ensuring effective controls are in place.

Any such intervention or voluntary notification may have an impact on M&A transaction processes and it will be important for parties looking at deals in technology or life sciences to consider and plan in advance whether UK Government intervention could be likely and to consider whether measures such as ringfencing information or a pre-acquisition reorganisation could be necessary as part of the preliminary transaction structuring.

A version of this blog originally appeared in PharmExec