Updated CMA merger guidance as NSI Act comes into force


The CMA has now published updated merger guidance to reflect the commencement of the new NSI regime. The revised guidance details the new national security regime as a regulatory process which applies to merging parties, in addition to CMA merger control. The guidance also notes that there may be coordination and information sharing between the Secretary of State, the Investment Secretary Unit and BEIS where cases are being investigated in parallel.

The National Security and Investment Act entered into force on 4 January 2022 and introduces, for the first time, a mandatory prior notification regime in the UK for qualifying transactions.  The Act also gives powers to the Government to call-in for review transactions that fall outside the notification requirement, including before the transactions have closed. Whilst the Government could already intervene in certain transactions on national security grounds, this was solely on an ex post ‘call-in’ basis.

Only the acquisition of qualifying entities in one of 17 ‘sensitive’ sectors defined by the Government fall under the new mandatory prior notification regime.  However, the regime does not apply to the acquisition of assets (regardless of sector), or to the acquisition of qualifying entities outside these sensitive sectors. Nevertheless, the new regime will apply to an extensive range of transactions. Of particular interest are the implications for biotech and life sciences agreements. The ‘sensitive sector’ definitions covering synthetic biology, artificial intelligence and advanced robotics will potentially be relevant in a large number of life sciences acquisitions.

The life sciences sector has certainly been in the frame with regard to national security (for example, the July 2020 amendment to the Enterprise Act gave the CMA new powers to review transactions concerning UK companies directly involved in public health emergencies) and following COVID-19 there is inevitably increased potential interest in life sciences transactions. The Office for Life Sciences has commented that the final definition is consistent with the intent of the Act, namely protecting national security whilst limiting the impact on the sector. The definition of synthetic biology for example, whilst remaining broad, is significantly narrower than the definition of ‘engineering biology’ as initially proposed and remains narrower than many other European regimes.  However, the fact that the transfer or licence of IP is subject to review by call-in/voluntary notification makes the UK unique.  The broad reach of the Government call-in power of asset transactions is likely to require a consideration of the Act in connection with many licensing and collaboration deals.

The Government has made clear that it will only use its new powers to block (and potentially unwind) transactions as a last resort where there is a significant national security concern and remedies are not appropriate. It is worth noting that, to date, no transactions have been blocked by the Government on national security grounds under its existing powers (i.e. under the current public interest merger regime).

Members of the competition team will be discussing the new regime as it develops over the coming months.