Is the NSI Act on your radar?

We’re used to discussing strategy with clients around this time of year but we’re finding the National Security and Investment (“NSI”) Act 2021 to be a notable omission from autumnal agendas. The NSI Act could impact timescales and deliverability of some transactions quite significantly. If you are considering a transaction, the NSI Act should be on your radar.

What is the NSI Act?

The UK Government has created a new piece of legislation, expanding its National Security regime to capture a wide range of transactions. Coming into force on 4 January 2022, the NSI Act will impact both the M&A market and businesses undertaking MBOs or reorganisations.

Key facts

Mandatory notification

• Applies to qualifying acquisitions of entities operating in any of the 17 stipulated sectors (inc. communications, AI and data infrastructure).
• The acquirer must notify the Investment Security Unit (ISU) and receive approval before completing.
• The ISU will conduct an initial review within 30 working days, after which they will either:
• clear the transaction; or
• conduct a full national security assessment (taking a further 30 working days, subject to a 45 working day extension).
• Failure to comply has civil & criminal consequences and the transaction can be made void.

Retrospective call-in

• The UK Government can call-in deals completed between 12 November 2020 and 4 January 2022.
• If the transaction would be caught by the new regime, advisors should consider notifying the ISU on an informal basis.

Whilst the UK Government estimates this legislation will impact around 2,000 transactions a year, we think that the figure could be much higher, given its wide scope.

How can Meridian help?

It’s thought that buy side lawyers will do the heavy lifting when it comes to conducting risk assessments and notifications. However, financial advisors will play a critical role in identifying potential “trigger events” early in deal timelines. Once identified, we can highlight concerns and ensure notifications are made promptly where necessary.

If you are considering a transaction and would like to discuss whether the NSI Act will impact your timescales, we would be delighted to speak to you. We’ve also seen lots of commentary from law firms such as Shoosmiths on the NSI Act and want to invite thoughts from other professionals on the potential impact. If you have any further questions, please contact Callum Larkin at Meridian callum.larkin@meridiancf.com

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