Based on our experience of advising on the National Security and Investment Act 2021, including working on notifications and dealing with BEIS, here are our 10 top tips for those involved in corporate transactions.

1. Carry out due diligence early on – only certain activities in 17 key sectors are subject to mandatory notification. Assessing whether an acquisition is caught may not be straightforward and requires first-hand knowledge of the target's business. Carefully frame questions by reference to Regulations under the Act and build time into the due diligence process to speak to relevant individuals to understand the required detail. It may also be necessary to seek guidance from BEIS if there is any doubt about whether the specific activities of the target fall within the key sector definitions, as there are areas of ambiguity.

2. Assess national security risk at the negotiating stage – the potential risks can be significant. Failure to comply with the mandatory notification regime will mean the transaction is void (unless retrospective validation is sought and obtained). Acquisitions which are notified, but are found to give rise to national security concerns, may be blocked, or only permitted subject to conditions. Under the voluntary regime, completed deals which are called in for review can be unwound. The parties must carry out their own risk assessment and agree whether their deal should be conditional on receiving clearance from BEIS. 

3. Consider whether warranties and indemnities are necessary – the Act applies to acquisitions completed on or after 12 November 2020. Consider whether a warranty and/or indemnity is necessary, particularly if the target may have made one or more acquisitions in a key sector, which may be at risk of being called-in for review by the Secretary of State.

4. Remember the Act can apply to non-UK companies – the Act applies to non-UK entities which either: (i) carry on activities in the UK, or (ii) supply goods or services to people in the UK, though mandatory notification applies only to transactions involving entities that carry on activities in the UK. The difference is not always clear, as "carrying on activities in the UK" does not always require business premises to be located in the UK; it might be sufficient, for example, for employees to travel regularly to the UK to service a customer relationship.

5. Factor the Act into your deal timetable where appropriate – if the transaction is notifiable, the timetable for completion will have to allow time for the notification to be prepared, submitted, reviewed and considered, with BEIS's review of the notification taking at least 30 working days after BEIS confirms receipt of a complete notification.

6. Remember there is no "de minimis" threshold – low value transactions, or those where the target has insignificant revenue in the UK, can be subject to mandatory notification if the target's activities are in one of the 17 key sectors.

7. Do not overlook corporate restructurings or reorganisations – a change within a corporate group, or the portfolio of a private equity firm, may fall within the scope of the Act if, for example, one group entity acquires a relevant interest in another group entity, even if the ultimate owner remains the same. However, investment by the existing shareholders of an entity will not trigger mandatory notification if there is no change in their respective holdings.

8. Provide complete information to BEIS – the statutory timetable only starts when BEIS confirms it has accepted the notification form. Make sure therefore that the form complies with all the notification requirements and includes all the necessary information. Take care to provide information to BEIS on the correct entities (and the wider corporate group as appropriate). Based on our experience, parties can expect BEIS to take at least one or two working days from submission before it confirms that the notification is complete.

9. Keep up to date with government guidance on the application of the Act – there is a raft of detailed government guidance that has been continuously updated and further guidance is expected to be published in July 2022, in light of BEIS's experience of the Act in its first six months. We hope that guidance will include details of some types of acquisitions that do not need to be notified under the Act. 

10. Remember other public interest powers of intervention can still apply – besides the national security regime under the Act, the Secretary of State has powers under the Enterprise Act 2002 to intervene in mergers and acquisitions on other public interest grounds, such as media plurality, maintaining the stability of the UK financial system, and combating or mitigating public health emergencies in the UK.

For further information or assistance, please contact one of our team.