Whilst foreign direct investments (“FDI”) in German companies have been subject to a screening regime for a long time, over the last few years the FDI regime in Germany has constantly become tighter and more M&A transactions are subject to review and the authorities take a closer look at those transactions. In 2018, for the first time in Germany, a transaction targeting a mid-size German metal spinning company was to be blocked under the FDI regime (although the deal was cancelled before this happened). The Covid-19 pandemic has drawn special attention to the FDI instruments that act to safeguard Germany’s medical capabilities; as such, FDI considerations have become an important topic in terms of deal certainty and deal preparation. 

Newly introduced “gun-jumping” rules require a thorough assessment to avoid fines and even criminal charges relating to information exchange and closing a deal without the requisite clearance. Since 11 October 2020, the EU FDI Screening Regulation applies, and, on 7 October 2020, the latest amendment to German FDI laws was introduced. Investments from the UK will be treated as FDI upon termination of the transition period for Brexit on 31 December 2020, absent specific arrangements. This white paper gives an overview of the German FDI regime and the key considerations necessary for the smooth navigation of an M&A process.