The UK’s competition authorities could be severely stretched by new merger rules that come into force today, said a partner at a leading law firm.
The new merger regime could lead to a 156 per cent increase in the number of deals that face scrutiny, adding to the burden of competition regulators which already face an expected increase in their work because of Brexit.
London head of competition and trade at law firm Baker McKenzie Samantha Mobley said: “The new thresholds are likely to lead to a greater number of merger notifications to the UK competition authority. This will have a significant impact on resources, at a time when the competition authority is already predicting that its mergers workload will increase by 50% as a result of Brexit."
The rules strengthen the government’s power to review mergers on the grounds of national security.
The legislation amends the UK merger control filing threshold for targets with revenue exceeding £1m instead of £70m in three areas: military and dual use, quantum technology and multi-purpose computing hardware.
Baker McKenzie said under the new laws at least 91 per cent of deals in these sectors will be scrutinised, up from 35 per cent before the rule change.
The firm said the value of the additional deals that will be examined is equivalent to £1.35bn.
Mobley said: “There is no doubt that the regulatory burden of doing deals is increasing and so are the challenges for global businesses. While the UK government will now have more power to review cross-border deals, there needs to be a balance between continuing to encourage foreign investment and protecting national security interests."
The UK government rules mirror similar toughening of merger regimes in the EU and USA.
Last month the European Parliament’s international trade committee voted to approve new tools for the EU to check that foreign investment into the EU doe not threaten security or public order.
The US committee on foreign investment (CIFIUS) regime is also in the process or reform, despite already being seen as a major barrier for inbound mergers and acquisitions to the US.