Planning to start investing in Western Europe in the near future? It is important to consider the fact that the coronavirus outbreak has opened up more opportunities to scrutinize foreign investments and block them for security reasons.
The European Union is the world's largest open market, and the impact of the pandemic on the economy has only strengthened the intentions of many investors to register a company on the European stock exchange, and global bankruptcies have forced companies to seek domestic investment, especially when banks tighten lending.
The EU is against national initiatives
The balance of foreign investment in Western Europe has changed radically towards China, and the growing involvement of government agencies in transactions. In this regard, the EU considered the general approach of national governments to monitoring foreign investment in European energy, ports and airports, as well as in the communications and financial sectors, which are essential for the protection of national interests.
The European Commission has called on member states to step up scrutiny of foreign acquisitions of shares in European companies. This is necessary to avoid aggressive takeovers by Chinese companies. The Italian authorities have expanded their powers to block or restrict FDI in the country's strategic sectors, and Germany has strengthened its ability to intervene in planned investments. Spain, France and the United Kingdom have become even more scrupulous in checking foreign investment.
Restrictions on investment in some European countries
Registering a company in the European technology sector is a national security process. In this regard, the UK advocates greater transaction intervention in three areas of technological development: AI, advanced materials and crypto-authentication. 5G technologies, especially in relations with China, are a political issue, as more and more efforts are being made in Europe to coordinate policies in the selection of counterparties for 5G infrastructure.
Not just China
Many governments are growing concerned about China's involvement in strategic industries and political pressure from the United States to reduce access to new technologies. China is not the only country of growing concern. Europe seeks to limit American investment, especially in areas such as foreign investment in the European medical and pharmaceutical sector.
What depends on investors?
Investors considering investing and acquiring companies in Western Europe should carefully plan to review their transactions to minimize risks. When implementing transactions, it is important to consider the following points:
- Comprehensive inspection of M&A transactions in Europe, supply and distribution chains, assets of the target company.
- When an entrepreneur decides to start a business merger in Europe, it is worth considering the possible loss of jobs and supply chain vulnerabilities.
- Anticipate the expectations of regulatory authorities, develop plans to meet legal requirements. They can be based on industry best practices and an understanding of the political system of the countries concerned.
As more countries impose FDI restrictions on Western Europe, whether temporarily to protect companies from significant business depreciation, or on an ongoing basis, buyers and sellers will need to consider FDI's global concerns when assessing risks. Foreign investment will not only be a serious problem in concluding mergers and acquisitions in Europe, but also for financial sponsors.
For detailed information on the current changes, you can schedule a consultation on structuring transactions with FDI in Europe from legal experts of our company.