Foreign Direct Investment Review Regimes in Europe

United Kingdom – White Paper (2)

• Three “trigger events” covering acquisition of:
• More than 25% of shares or votes
• Significant influence or control
• Further acquisitions of significant influence or control
• Acquisition of more than 50% of an asset, or significant influence over or control of an asset (includes real estate and IP)
• Some similarities to existing voluntary system of UK merger control
• Low threshold of control (c.f. material influence)
• “Interim restrictions”
• Information gathering powers
• Sanctions
• Civil and criminal penalties
• Director disqualification

Recent Trends, Remedies and Wider M&A Implications

Recent trends and their relevance for M&A

Recent developments

• Increasing number of jurisdictions with mandatory filing requirements
• Additional temporary measures due to Covid-19
• The level of review varies depending on the buyer’s identity
• Longer, more unpredictable review periods
• Often very political processes
• Both structural and behavioural remedies often accepted

Impact on M&A deals

• Increased DD requirements, risk of high fines for missed filings
• Increased number of CPs
• Risk assessment regarding the right target, identity of co-investors
• Effect on long-stop dates
• Hell or high water clauses more risky
• Remedies should be discussed with authorities as early as possible

Remedy and decision types (I)

Control over assets/businesses

• Energy resources (Woodside Petroleum)
• Critical infrastructure (Alstom, Hinkley)
• High tech business (Qualcomm, Kuka)
• Land (Graincorp)

Access to information

• Personal information (Moneygram)
• Proximity to security installation (Ralls)
• Sensitive information (Sepura/Hytera)

Prohibitions

• Represent a small number
• Prevalent in control issue cases

Structural remedies (divestments/ring fencing)

• Similarly small number but increasing
• Prevalent in access to information/sensitive technology cases