The Times - UK (2020-11-14)

58 2GM Saturday November 14 2020 | the times

Business

5

Boris Johnson’s government this week
unveiled the largest shake-up of the
mergers and acquisitions regime for
almost 20 years. Dealmakers had been
warned that change was coming, but

Profits have a hangdog

Profitability at Britain’s largest craft

brewer fell back last year, despite a

25 per cent rise in sales to £215 million,

as its fast growth came at a high price.

Brewdog experienced an increase in

overheads as it expanded its bar net-

work in Britain and overseas, the Scot-

tish company’s latest accounts show.

Group pre-tax profit was £1.1 million,

compared with a pre-tax loss of

£600,000 in 2018, but the company

only sneaked into the black thanks to its

recording of a £14.2 million gain related

to an acquisition. Operating profit was

down compared with 2018 once the

impact of the acquisition was stripped

out.

Known for its outrageous publicity

stunts and wide range of craft beers,

Brewdog was founded in 2007 by James

Watt and Martin Dickie. The Scottish

company has expanded internationally

to become the largest of a new wave of

craft brewers. It is part-owned by TSG,

a private equity firm.

Its Punk IPA brand is the most popu-

lar craft beer in the UK and it has more

than 100 bars. The company said that it

had shipped 183 million cans of beer last

year, while sales at its bars grew by

48 per cent.

In the accounts, Mr Watt said that

“slightly reduced” earnings “reflect our

high growth rate and our global invest-

ments and infrastructure as we now

have four major breweries globally”.

He said that the business had weath-

ered the Covid-19 storm “better than

James Hurley Enterprise Editor

left businesses

vulnerable to

bids.

Under Britain’s

present rules, the

government is able to

intervene in transac-

tions if a deal has repercus-

sions for media plurality,

financial stability or national security.

The bill aims to make it mandatory for

foreign buyers pursuing deals for Brit-

ish companies in 17 industries, includ-

ing transport, artificial intelligence and

energy, to report the planned transac-

tions to the government. It applies not

only to takeovers of companies, but also

to purchases of big shareholdings and

assets such as intellectual property.

The government will have 30 work-

ing days after notification to decide

Scale of intervention in foreign

the extent of the overhaul has raised

eyebrows throughout the City.

“It’s a sea-change in the way that this

country has approached foreign invest-

ment screening,” Nicole Kar, head of

UK competition at Linklaters, the law

firm, said.

It was no secret that ministers

wanted to make it easier to stop sensi-

tive assets from falling into foreign

hands. “This was always coming,” a

senior City investment banker said.

The direction of travel was set by

Theresa May, Mr Johnson’s predeces-

sor, when in 2018 her government

outlined proposals for greater powers

to intervene in deals on grounds of

national security.

At the time, the approach set out in

the government’s white paper was seen

as a dramatic clampdown. Officials

estimated that the proposals would

have led to ministers being notified of

about 200 deals every year and inter-

vening in about 50.

Yet the scale of state oversight

envisaged by the National Security and

Investment Bill published this week is

greater still. Under its far-reaching

plans, the government expects to be

notified of between 1,000 and 1,830

transactions a year and to review as

many as 95. That compares with 12

public interest interventions in deals on

security grounds in the 18 years since

the Enterprise Act, which set out the

existing rules, came in.

Critics in the City fear that as a result

deal activity in one of the most open

mergers and acquisitions markets in

the world could be stymied.

Mounting concerns about China, in

particular, are thought to driving the

government’s more interventionist

approach.

Unease in Westminster about Chi-

nese companies has escalated in recent

years. In July the government decided

that equipment supplied by Huawei,

the Chinese telecoms powerhouse,

must be removed from Britain’s 5G

mobile network by 2027 amid security

concerns. There were worries this year,

too, that a Chinese state-controlled in-

vestment group was trying to stage a

boardroom coup at Imagination Tech-

nologies, a British chip designer,

prompting Oliver Dowden, the culture

secretary, to step in.

Yet barely three miles to the east of

Parliament Square, among the corpo-

rate towers of the Square Mile, the talk

is not so much of security concerns as

the threat of protectionism. Sir Nigel

Rudd, the City grandee, said: “I think

we have been a little bit free in allowing

companies to be taken over, but there is

a balance here of having an open

market and investors feeling that if

somebody wants to buy their business

they can sell it.”

Sir Nigel, 73, is a former

chairman of Heathrow air-

port, which is 10 per

cent- owned by China

Investment Corpo-

ration, the sover-

eign wealth fund.

“When I was on

the [Heathrow]

board, the Chinese

were very good in-

vestors,” he said.

Richard Butter-

wick, an M&A part-

ner at Latham & Wat-

kins, the law firm, said:

“Is it going to be the trans-

parent process that it’s being

portrayed as by the government, or is

there a risk that it becomes a more po-

liticised process?”

Britain is following other countries,

including the United States and Ger-

many, which have tightened up their

rules on foreign takeovers because of

worries about China.

The Covid-19 pandemic has spurred

some governments, including Austra-

lia, to clamp down even further amid

concerns that falling share prices have

As fears about Chinese

influence grow, greater

government p owers to

vet deals are on the way,

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