Nvidia Corp. may make legally binding, post-offer commitments to the U.K. government to prevent further scrutiny of its acquisition of Arm Holdings Ltd, according to legal experts.

The $40 billion deal comes at a time when the U.K. government is looking at ways it can better protect home-grown companies from foreign takeovers. Although Arm is already owned by Japanese company SoftBank Group Corp., its importance to the U.K. economy means it could still be subject to intervention from Prime Minister Boris Johnson's government.

Announcing the deal, Nvidia said it would keep Arm's headquarters in Cambridge, and that it would build an artificial intelligence lab nearby. "We are happy to put legally binding agreements behind all our commitments," a company spokesperson told S&P Global Market Intelligence.

The undertakings could be very similar to those agreed to by SoftBank when it bought Arm in 2016, experts said. The five-year promises included a commitment to preserving U.K.-based jobs and headquarters among others.

"Nvidia is trying to work out what kind of undertakings to give to oil the wheels," Sharon Jenman, head of public companies team at FromCounsel, an online law resource, said. "The government will want Arm's headquarters to remain in Britain," Jenman said.

"Parties can volunteer undertakings, but [the government] can ask for more. There is no prescribed form of undertakings and no legislative provision as to what these should look like."

The U.K. has the power to intervene in a merger if it raises competition concerns or if the Secretary of State for Business, Energy and Industrial Strategy deems it to be in the public interest on national security, media plurality or financial stability grounds. In both cases, the Competition and Markets Authority, or CMA, investigates the impact of the deal — and has the ability to launch an in-depth phase 2 review — though the Secretary of State makes the final decision after intervening.

The CMA usually reports to the Secretary of State within four to six weeks of an intervention notice. If the Secretary decides a phase II investigation is required, this can take up to 24 weeks.

Notably, the semiconductor deal follows a number of important changes to the legislation that permits the government to investigate mergers that raise security concerns, known as the Enterprise Act 2002. The amendment most relevant to the Arm sale was made in 2018 to lower the thresholds at which interventions could be made for the computing hardware sector, in order to protect national security assets while a broader legislation was formulated.

As a result of the change, the government can intervene in semiconductor acquisitions if the annual turnover of the target is £1 million or more — reduced from £70 million, which remains the threshold for other industries — or if the target accounts for 25% or more of purchases or sales of any goods or services in the U.K.

"Arm is an important part of the U.K.'s tech sector and makes a significant contribution to the UK economy," a government spokesperson said in a statement. "While acquisitions are primarily a commercial matter for the parties concerned, the government monitors these closely and when a takeover may have a significant impact on the U.K. we will not hesitate to investigate further and take appropriate action."

The U.K. company's co-founder Hermann Hauser said he was "extremely concerned" by the Nvidia deal in an open letter to the Prime Minister. "Arm is the only remaining U.K. technology company, with a dominant position in mobile phone microprocessors," Hauser wrote.

Arm's status as one of the U.K.'s leading computer chip firms along with its partnerships with the military means the government has the option to intervene in the deal, but it is unlikely that the takeover will be blocked on national security grounds, Neil Brown, a partner at law firm RPC who advises clients on M&A and corporate transactions, said.

Arm in August announced a three-year agreement with the U.S. Defense Advanced Research Projects Agency, or DARPA, that granted it access to all of the chip firm's commercially available technology.

When it has intervened on national security grounds, the government has cleared the majority of the deals once undertakings were agreed upon. "Nvidia is a highly reputable American company with a massive stock market listing and the U.S. is one of our staunchest NATO allies, so it is hard to see how the deal gets blocked on a national security basis," Brown said.

The takeover is subject to regulatory approval from the U.S, China, the European Union, and Arm's native U.K. Potentially lengthy regulatory reviews were cited by the parties as one reason the transformative deal could take as long as 18 months to complete.