As a result of globalisation and digitalisation, geopolitics, investments, and (national) security have become increasingly intertwined. This new dynamic has raised concerns about undesirable foreign interference. To protect national security governments in a growing number of jurisdictions are adopting, refining, or expanding (foreign) direct investment (FDI) screening and clearance frameworks.
FDI screening frameworks have become an increasingly integral part of the cross-border M&A deal process. As these mechanisms continue to broaden in scope and tighten in enforcement, they can materially affect deal execution. Most FDI regimes are suspensory in nature, they introduce regulatory uncertainty, mandatory review periods, and the risk of substantive governmental intervention. Failure to identify and address applicable FDI requirements in a timely and comprehensive manner may adversely impact transaction timetables, closing certainty, and, in certain circumstances, the overall viability of the contemplated investment.
