It's Not All About China: Foreign Investors Face New European Regulatory Challenges to Getting the Deal Done
Baker Botts Partner, Catriona Hatton and Senior Associate, Sofia Doudountsaki, recently contributed an article to the Competition Law Insight publication, on the increasing European scrutiny and regulatory challenges to foreign investors seeking to acquire European assets.
In 2020, European governments and institutions moved to bolster protection of European companies and critical assets from foreign takeover through increased foreign direct investment (FDI) screening, as well as a proposed new tool which would see acquisitions subsidised by foreign governments subject to prior approval by the European Commission. While this is partly in response to the economic crisis caused by Covid-19, concerns about how to control foreign investment in EU assets, in particular by state-owned and state-subsidised Chinese companies, have been brewing for several years.
These developments present a more challenging regulatory landscape for non-EU investors and while concerns have centred around Chinese investment, it is not all about China. FDI screening applies to investments across a broad range of sectors by all non-EU companies and needs to be factored in to deal planning from the early stages. Separately, the potential new EU merger-control type instrument to control distortions caused by foreign subsidised acquisitions, would draw increased scrutiny of acquisitions by state-owned-entities including from China, Russia and the Middle-East but would have a much broader reach, particularly if its scope extends as proposed, to a very broad swathe of both direct and indirect foreign government subsidies.
This article takes a look at key features of FDI in the EU, as it impacts M&A as well as the current scope of the proposed EU vetting of foreign-subsidised transactions.
To view the full article please click here.