In recent times, the relevance of foreign direct investment (FDI) and national security regimes to international M&A has dramatically increased. Far more countries have active FDI regimes than was historically the case, and many pre-existing regimes have expanded their scope. The COVID-19 pandemic accelerated this ongoing trend.
The regimes now typically cover much more than the traditional defence and government sectors, but also healthcare, advanced technology, energy, critical infrastructure (including transport) and data businesses, among others. Low value transactions may be caught, even where no merger control filings are required. Indirect acquisitions are usually covered as well, so that the whole target group needs to be considered for potential FDI filing requirements. Subsequent increases in shareholdings may also be reportable or require prior clearance.
Most regimes are mandatory and suspensory, meaning that a deal has to be notified and cleared before closing. Penalties may be severe (including criminal offences in some cases) in case of non-compliance with FDI regulations. As a consequence, it has become crucial for investors to factor FDI analysis into their deal processes at an early stage.
Ashurst has broad experience in this increasingly complex area, across a wide variety of sectors. We regularly manage FDI analysis and processes on deals across multiple jurisdictions, assessing the sensitivities of the activities at stake, ensuring filings are executed in a coordinated and consistent manner, assisting our clients within the negotiation of commitments or conditions that can be imposed by governments, in all cases working with trusted local counsel where appropriate. We do this as part of our transactional advice or as stand-alone advice, and in tandem with our review of merger control regimes, ensuring a smooth and efficient one-stop shop for clients. We pride ourselves on providing practical advice on both the process and substantive issues.
