The politics of global M&A: navigating foreign investment controls

The COVID-19 crisis has accelerated global trends towards more expansive reviews of foreign direct investment (FDI). The first half of 2020 has seen unprecedented changes in FDI regimes, with the European Commission urging EU member states to make full use of existing FDI screening mechanisms (and to introduce new rules where necessary) to protect critical health infrastructures, supply of critical inputs, and other critical sectors. A number of other leading economies are taking similar steps to strengthen their FDI regimes.

As governments start to consider the longer-term impact of COVID-19, free market economies are increasingly looking to defend important national companies and assets. The pandemic also exposed weaknesses in global supply chains, leading many countries to re-evaluate the meaning of national security, critical industries and key assets/infrastructure. 

Emergency measures introduced in recent months may be here to stay and further permanent legislative changes lie ahead, including in the UK (which published two new statutory instruments yesterday) and the EU. However, the global picture is mixed. In China, the continued direction of travel is towards the opening up of its markets to provide a boost to the economy. Even before COVID-19, inbound FDI in China was trending downward, with investment moving towards Vietnam and other Southeast Asian countries, for reasons such as rising cost of labour and land, and uncertainty caused by the US-China trade tensions. 

In our latest episode, podcast host Jenn Mellott is joined by foreign investment experts Michele Davis (London), Aimen Mir (Washington, DC) and Hazel Yin (Beijing) to discuss global developments, upcoming changes and practical tips for deal-makers. 

Our experts discuss which sectors are likely to face close scrutiny, including investments across a swathe of healthcare assets – from vaccines to medical equipment and protective gear. Broader interventionist measures to guard against hostile investments in other industries that have suffered financially during the pandemic are also expected. There are a number of key commonalities across regions, such as the increasing attention across jurisdictions on protecting domestic critical infrastructure, technology and citizens’ sensitive data. 

Rapidly changing laws, policies and politics will remain an important feature of global M&A markets in the year ahead. Early FDI risk assessments, combined with a carefully thought-out deal strategy and robust contractual protections, are key to successfully navigating complex FDI regimes. 

Listen to the podcast now.

For additional reading on the foreign investment landscape, visit our Global antitrust in 2020: 10 key themes report. For insights on navigating the impact of COVID-19, visit our coronavirus alert hub.