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Evolving FDI screening in Germany from a political and legal perspective

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The year 2022 has been dubbed a historic turning point in Germany’s foreign and security policy. Geopolitical considerations now permeate virtually all policy fields and increasingly shape business environments.

When it comes to scrutiny of foreign direct investments, this historic turning point can be said to have been reached five years ago – when Germany implemented the first major overhaul of its FDI screening regime in 2017, triggered by the Chinese company Midea acquiring Germany’s robotics manufacturer Kuka.

Since then, FDI screening has become a dynamic policy field that has given the government additional instruments to pursue industrial and political priorities. The current coalition government is ready to make use of these powers as a tool to implement its political agenda. This also means that as political priorities shift, new sectors can quickly become the focus of FDI screening.

Dealmakers need to be aware of not just the impact that FDI screening can have on timelines, but also of the risk of politicisation of the FDI screening procedure. Parties to a transaction should carefully assess political priorities and design their financial, legal and communications strategies accordingly.

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