View all newsletters
Receive our newsletter – data, insights and analysis delivered to you
  1. Comment
October 25, 2021updated 16 Feb 2022 9:59am

NSI Act 2021 will have little impact on US acquisition of UK defence firms

The UK Government continue to have to balance neoliberal principles and appeasing a pro-British business voter base.

By GlobalData

There has been a recent spate of acquisitions of major UK defence companies by US firms. Notable examples include the Cobham’s sale to Advent International in 2020 and the acquisition of Meggitt by Parker-Hannifin. These deals all have high values, both in terms of deal price and in terms of what the intellectual and information ownership that the UK defence industry will lose; the UK Government continue to walk a tightrope between their neoliberal principles and appeasing a pro-British business voter base.

Madeline Wild, associate defence analyst at GlobalData comments: “At a time of national uncertainty and strain as the UK tries to rebuild after Covid-19 and Brexit, any hits to the industry resulting from loss of business ownership will be keenly felt. The National Security and Investment Act (NSI Act) that was introduced this year aims to safeguard UK industry against potentially malicious foreign investment. However, due to the fact that the US are close allies and share sensitive information with relative freedom, the NSI Act will likely do little more than slow down the acquisition process. Both the acquisition of Meggitt and Ultra Electronic, which were initiated after the introduction of the NSI Act have been referred for further investigation by the UK Government. This has been to counteract the threat of possible malicious investment from foreign entities looking to acquire UK defence company’s intellectual property for their own gain, which in turn could then be used against the UK. In the past, the neoliberal policies of the UK have meant that foreign direct investment (FDI) screening is less rigorous than its European counterparts, however, increased FDI scrutiny will change this.

“Several factors have facilitated the uptake in US acquisition of UK companies in the defence sector as well as in other industries. Firstly, the price of the stock has been relatively cheap this year owing to Covid-19 and post-Brexit financial struggles and secondly, current government policies have encouraged foreign investment into the UK. The slogan ‘Global Britain’ represents the idea being pushed by Boris Johnson’s government that the UK is ‘open for business’. Subsequently, investment into the UK, be it through M&A practices or other means, is being actively encouraged, at the expense of UK owned industry. This is at odds with their European neighbours, where having partial ownership by the state is common, large defence companies such as Thales, Hensoldt and Nammo all have some form of state ownership. The recent flurry of M&A activity in the defence industry has been subject to investigation thanks to the NSI Act, demonstrating the fine line being walked by the government between upholding their neoliberal FDI principles, whilst appeasing their voters who would rather promote British-owned business first.”

Related Companies

Free Report

What’s missing from your IPO industry assessment?

IPO activity all but stopped in 2020, as the investment community grew wary of the effects of COVID-19 on economies. No matter how deserving a business was of flotation, momentum was halted by concerns of when a ‘new normal’ of working patterns and trade would set in. Recently, sentiment has changed. Flotations picked up again during the second half of 2021, and now in 2022 the mood is decidedly optimistic. Business leaders have their eyes on fast rebounding economies, buoyant market indices and the opportunity once again to take their businesses public. As a result, global IPOs are expected to hit back this year. With GlobalData’s new whitepaper, ‘IPOs in Consumer and Retail: 5 must-include elements for your prospectus industry report’, you can explore exactly what is needed in the essential literature. GlobalData’s focus lies in the critical areas to get right:
  • Macroeconomic and demographic environment
  • Consumer context
  • Industry environment
  • Competitive environment
  • Route to market
Interested to learn more about what to include in your IPO Industry Assessment report? Download our free whitepaper.
by GlobalData
Enter your details here to receive your free Report.

NEWSLETTER Sign up Tick the boxes of the newsletters you would like to receive. The top stories of the day delivered to you every weekday. A weekly roundup of the latest news and analysis, sent every Friday. The defence industry's most comprehensive news and information delivered every month.
I consent to GlobalData UK Limited collecting my details provided via this form in accordance with the Privacy Policy


Thank you for subscribing to Army Technology