The rise of FDI regimes and their impact on M&A transactions

Foreign direct investment (FDI) is an important part of the global economy: Organisation for Economic Co-operation and Development data indicates that there was US$1.426 billion of global FDI in 2019. In recent years, governments around the world have shown an increasing desire to scrutinize and, if considered necessary, intervene in transactions involving FDI, motivated by a number of geopolitical factors including rising protectionism, concern about cybersecurity threats, and more recently the need to protect critical industries in response to the COVID-19 pandemic. There are exceptions – notably, China, Chile, and the United Arab Emirates have all relaxed their FDI rules to encourage foreign investment. However, the general trend is for governments to seek to exercise greater control over flows of FDI into their jurisdictions.

Against this backdrop, in November 2020 the United Kingdom took steps to enhance its ability to review and intervene in transactions which may give rise to national security concerns. The new UK National Security and Investment Bill, when implemented into law, will introduce a mandatory notification and preapproval requirement for transactions in key sectors of the UK economy that the UK government considers to be the most sensitive. This is backed up by a voluntary notification option for other sectors and a call-in power for transactions that have not been notified. The new regime will apply to a wide range of transactions (for example, there are no thresholds to exempt smaller deals; and asset, as well as share, deals are caught) – with powers to impose significant sanctions for noncompliance, including fines in the millions and potential imprisonment.

Next steps

For M&A planning purposes, we set out some of the key considerations and provide a high level overview of the key features of a number of significant FDI regimes including the United States, United Kingdom, France, Spain, Germany, Italy, and Australia.


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Authored by Mark Jones, Sarah Shaw, Christopher Peacock, and Bea Watts.




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