How Stricter Foreign Investment Screening Rules Impact Technology Mergers and Acquisitions in Europe


Tobias Björklund of Setterwalls said that in Sweden, as of January 1, the rules of the Protective Security Act are applicable to transactions with entities concerned with security. But the Swedish government has also appointed a special investigator to assess how a national FDI screening system could be designed. Björklund said: “A final report from the Special Investigator will be released no later than November 2, 2021”.


As a rule, there are different investment thresholds in a target company at which the FIC deposit will become mandatory. For example, in Germany filing is still mandatory for acquisitions of parts of defense-related companies, regardless of their size. In contrast, investments in critical infrastructure companies are only considered if a foreign investor plans to buy 10% or more of the target’s voting rights. It is generally irrelevant whether the investment is structured as a stock or asset transaction. In the UK, transactions involving the purchase of a 25% or more stake in a target in 17 particular sectors of the economy will be subject to the mandatory notification regime.


In many countries different rules apply to European and non-European investors. It is usually also particularly important if an investor or one of its majority shareholders is controlled by a foreign government or the armed forces or has been involved in criminal activity. This is one of the provisions stipulated in the EU FIC regulation and has been assumed explicitly in the FIC rules in Spain and Germany. The UK also notes that this factor will be important in a national security assessment.

Anders Hagstrøm from Bech-Bruun in Denmark said: “Danish FDI regulations also cover indirect investments. If an American company purchases a Canadian company with a Danish subsidiary in one of the particularly sensitive sectors, the investment must be approved by the Danish Business Authority. before completion ”.

According to Lorenzo Stellini of the Italian company GPBL, FIC filtering in different European countries ultimately serves national security and economic interests. “To assess whether a transaction requires a deposit, it will be necessary to analyze three main elements: the industrial sectors concerned, the investment thresholds and the track record of the individual foreign investor,” he said.

Legal consequences

Similar to the merger review filing rules, in European countries with FIC rules, closing and implementing a transaction is prohibited before the FIC is cleared. Careful analysis of the FIC has therefore become vital in technology M&A transactions, due to the serious legal consequences resulting from a violation of FIC rules. If the closing took place before the clearance, the transaction can be prohibited retroactively and must then be totally or partially canceled. Other consequences can include high fines and even criminal penalties for the investor and his management. In France, for example, the FIC authority can impose a fine on the foreign investor of twice the amount of the unauthorized investment or 10% of the annual turnover excluding taxes of the target company of the investment. or € 5 million for a legal person or € 1 million for an individual, the higher of the two.


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