Foreign investment screening
The power of states to block or set conditions on the acquisition of sensitive companies by foreign investors, now a major political risk in mergers and acquisitions.
Most major economies now require approval for a foreigner to acquire a company deemed sensitive: defense, energy, telecoms, data, semiconductors, health. In the United States, the Committee on Foreign Investment, CFIUS, is the instrument; the 2018 FIRRMA law extended its reach to minority stakes in critical technologies and personal data. In the European Union, Regulation (EU) 2019/452, applicable since October 2020, created a cooperation framework among member states without harmonizing national regimes. In France, the Monetary and Financial Code requires prior approval from the economy minister for takeovers, and above certain ownership thresholds, in a list of activities that is regularly widened. The state may approve, impose conditions, divestments, data localization, governance, or refuse. For insurance, screening creates a new kind of political risk, which comes not from an unstable host country but from the target's own government. It weighs on warranty and indemnity insurance, which often excludes the consequences of a regulatory refusal, on break fees agreed between buyer and seller, and on investors whose assets may be subject to divestment orders imposed after the fact.
Textbook case: a non-European fund signs to acquire a French maker of satellite components. The ministry makes its approval conditional on keeping production in France and excluding the buyer from certain programs; the deal is renegotiated, and the break fee agreed for a refusal does not come into play.
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