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Is the UK government taking a tougher approach to takeovers?

The UK government is said to be taking a close interest in the sale of Ultra Electronics to Cobham, a company owned by the American equity group Advent.

A key military supplier Ultra makes sonobuoys - which are floating sonar detection devices - and other classified sonar equipment for the Royal Navy and employs over 1700 people.

Advent has a record of buying companies and then breaking them up – it sold off Cobham’s antenna and radio business as well as its in-flight air-to-air aircraft refuelling systems division - and due to this deal's potential impact on national security the business secretary, Kwasi Kwarteng, is said to have instructed Whitehall officials to monitor the multibillion-pound takeover bid.

This move highlights a growing trend in which the UK government appears to be taking a more aggressive position when it comes to the acquisition of British companies.

While it is concerned at the impact on British-owned defence manufacturing capabilities should Ultra be sold, the UK government has also recently announced that it could block China’s state-owned nuclear energy company from building a nuclear reactor in Britain, again on national security grounds.

It does appear that the UK government is taking a more robust approach to M&A activity than many of its predecessors but there are certainly risks. While it wants to protect British jobs and interests, it is keen to promote a more ‘global’ Britain which would suggest that the Ultra acquisition will proceed but with strict undertakings to safeguard UK jobs and technology.

Neil Tyler

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