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Too little too late? Britain is introducing guidelines to guard tech firms from abroad takeovers

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UK Prime Minister Boris Johnson made a statement on April 27, 2020 on Downing Street in central London after returning to work after being hospitalized with Covid-19 disease after a break of more than three weeks.

DANIEL LEAL-OLIVAS

LONDON – The UK government this week put in place new rules designed to protect the UK's best and brightest businesses from being devoured by other potentially hostile nations.

However, some wonder if the rules, which have been in place for several years and will go into effect this Wednesday this week, are too little and too late as two of Britain's most innovative companies have already been sold overseas. Cambridge-based chip maker Arm was sold to Japanese tech giant SoftBank in 2016, and London-based artificial intelligence laboratory DeepMind was sold to Google in 2014.

Matt Clifford, the executive director of start-up Factory Entrepreneur First, told CNBC that the government "probably" should have interfered with these businesses. "Technology is a huge and growing national security problem," he said, adding, "technological sovereignty is very important."

While Arm sold for £ 24 billion ($ 31.6 billion), DeepMind only sold for £ 400 million. Given that DeepMind is widely regarded today as one of the world's leading providers of AI, the Google deal is viewed by experts as a bargain.

Ian Hogarth, an entrepreneur turned tech investor, believes DeepMind should be nationalized by the UK government so it doesn't have to sell itself to an overseas tech giant.

"I find it hard to believe that the UK wouldn't be better off if DeepMind was still an independent company," he wrote in an essay in June 2018. "How much would Google DeepMind sell for today? $ 5 billion? $ 10 billion Dollars? 50 billion dollars. " "It's hard to imagine that Google would sell DeepMind to Amazon, Tencent or Facebook at almost any price."

Hogarth added: "In retrospect, would it have been better for the UK government to block this acquisition and keep it independent? Is there still a reason for the UK to reverse this acquisition and buy DeepMind from Google and Google? " reinstall it as an independent entity? "

While DeepMind is a leader in AI, Arm is a leader in semiconductors or chips. Its energy efficient chip architectures are used in 95% of the world's smartphones and are widely considered to be the jewel in the crown of the UK tech industry.

"In Arm's case, I can't understand why some investors here didn't outbid the overseas people," said Jon Crowcroft, a computer science professor at Cambridge University. "Poor are a great success and also super viable in the long term."

SoftBank is currently trying to sell Arm to US chip maker Nvidia for $ 40 billion. However, there are a number of hurdles to overcome before the deal is signed, including regulators in China.

While DeepMind and Arm are no longer British in the eyes of some people, there are a number of other fast-growing tech companies that are very much – and that might be worth protecting. For example, the security company Darktrace and the AI ​​chip manufacturer Graphcore.

Beyond AI and chips, Crowcroft in the UK has aerospace and biotech companies like BAE Systems that are worth protecting.

Some have suggested that the new rules could potentially make it difficult for founders and their investors to sell businesses.

Chris Smith, venture capitalist at Playfair Capital in London, told CNBC he didn't think this would have a material impact.

"The scope is likely to be quite limited, both in terms of the number of countries on the 'no deal' list and the number of countries that would pass the strategic test," he said. "In reality, it reflects what we already know that we have two tech universes – one in the west and one in the east."

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Katherine Clark