In today’s complex global investment landscape, understanding and incorporating political stakeholders’ perspectives on cross border deals is crucial. Key questions arise: Which sectors are under most scrutiny? What factors are driving the debate on foreign direct investment (FDI) in different markets? What stakeholder concerns can dealmakers address when structuring transactions to avoid headwinds? How do media attention and political scrutiny interact, and how can communicators shape narratives and minimize risk?
To better understand what drives political and regulatory scrutiny of cross-border deals in key global markets, our teams surveyed political decision makers in the US, the UK, the EU, Germany, France, and Italy. Quantitative and qualitative media analyses conducted by our local experts provide additional insights into the relationship between regulatory procedure, political attitudes, and reporting. Our analysis is designed to help structure and communicate cross-border and multi-jurisdictional transactions, taking political and media concerns into account throughout the transaction process.
Executive Summary
Political concerns over foreign investment have become a fixture in cross-border deals. Even though most countries have already strengthened their screening regimes in recent years, political decision makers across surveyed markets want stricter screening of foreign direct investment. In all surveyed markets, over 80% of political decision makers say that FDI screening should be applied more or much more stringently. In the US, 91% of respondents are either concerned or very concerned about investments from other countries into the US. However, focus geographies and sectors vary across jurisdictions – and should be reflected in multi-jurisdiction deals.
Decision makers want regulatory enforcement practices to reflect policy goals that are not necessarily in the technical scope of the instruments in question. 95% of UK respondents say that the UK national security regime should also seek to protect UK economic leadership in certain sectors, and 85% of Brussels respondents want industrial policy and competitiveness to play a greater role in EU merger controls enforcement. Our analysis reveals a variety of concerns that play a role in the assessment of individual transactions, with technology transfer the top concern for the US (59%), security of supply the top concern for Germany (60%), job retention the top concern in the UK (70%) and protection of trade secrets the top concern for France (55%).
Informed transaction structures and comprehensive engagement strategies can help dealmakers meet political concerns. Commitments to maintain sites, jobs, and supplier relations or to maintain data help individual transactions overcome an overall skeptical climate surrounding FDI. If anchored in investment agreements, they can be reflected in engagement and communications measures from the get-go and help smoothen the overall screening process. Dealmakers are also well advised to consider remedies to political concerns throughout regulatory processes and ensure they remain sensitive to market-specific political priorities.
Cross-jurisdictional comparison of findings
Geographic focus: China stands out as the country under most scrutiny, with over 70% of respondents in Germany, the UK, France, and Italy saying that Chinese investments should be reviewed more closely.
Sectoral focus: To add further complexity, the survey highlights differing sector priorities across regions. Understanding these differences vis-à-vis specific transactions can help one assess which sectors are most likely to become subject to politicization, critical reporting and difficult review processes. Political decision makers in European countries, especially France and Germany, view defense as the most sensitive sector. The US and the UK prioritize ICT and semiconductor sectors. Health and biotech are seen as critical sectors globally. Energy and raw materials are major concerns for Germany, Italy, and EU respondents. This underscores the EU’s broader concerns about energy dependency and reflects similar sentiments across member states.
Areas of concern: The analysis also reveals distinct priorities among countries regarding deal structures. While technology transfer and job retention emerge as shared concerns across markets, US respondents also clearly highlight the importance of US commercial interests, whereas German respondents are particularly concerned with supply security.
Recommendations for dealmakers and communicators
Align deal structures with evolving priorities of political decision makers: Our findings indicate that political decision makers as well as the media can easily view individual transactions in the context of broader policy objectives, increasing the risk of politicized regulatory procedures. Dealmakers can minimize the risk of politicization by structuring deals around the material areas of concern identified by this study – from guaranteeing job retention or security of supply to ringfencing data or establishing technology lock-boxes.
Understand sectoral priorities and reflect regional nuances: Sectoral priorities for FDI screening impact the risk of politicization and interference. Different countries exhibit distinct preferences here, with information technology, defense, health, and energy emerging as key sectors. Dealmakers should take these sensitivities into account both in strategic decisions and more detailed planning.
Emphasize long-term commitments: Dealmakers should emphasize their dedication to local job creation and economic stability, particularly in sensitive sectors. This approach not only enhances the attractiveness of proposals but also aligns with national interests, positioning investments as beneficial partnerships rather than mere transactions.
Download country reports:
Deal Clearance Insights - Spotlight on France
Deal Clearance Insights - Spotlight on Germany
Deal Clearance Insights - Spotlight on Italy
Deal Clearance Insights - Spotlight on the U.S.
Deal Clearance Insights - Spotlight on the UK
Deal Clearance Insights - Spotlight on the EU
