Navigating government influence in cross-border M&A

By Marc Irisson, Partner & Co-founder at Translink Corporate Finance France, Board Member of Translink International

Cross-border M&A faces unprecedented geopolitical headwinds that threaten deals before and after closing. A recent case saw the French government block the sale of Photonis, a French defence technology company, to a US buyer, Teledyne, citing national security concerns. This intervention reduced the US buyer’s offer by 26%, ultimately redirecting the sale to a domestic company. Such political interference highlights the growing risks of government scrutiny in cross-border transactions.

In an earlier article by Translink Corporate Finance titled ‘Navigating regulatory challenges in cross-border M&A deals’, the group explored the multifaceted legal, cultural, and political hurdles companies face across regions like Europe, the U.S. and Africa. Here, Translink builds on that foundation by examining how geopolitical dynamics reshape the M&A landscape and offer insights into how businesses can navigate intensifying government scrutiny to achieve their global ambitions.

Understanding governmental mechanisms of scrutiny

Governments deploy specific tools to safeguard national security in M&A transactions. In the US, the Committee on Foreign Investment in the United States (CFIUS), an inter-agency body chaired by the Treasury Department, evaluates deals that might result in foreign control of US businesses. Its scope spans defence, energy, technology, infrastructure, and data, with the authority to block transactions or impose conditions. Notification isn’t mandatory but is advisable to avoid post-deal interventions.

The EU’s approach under Regulation 2019/452, is less centralised. It encourages collaboration between the European Commission and member states, 18 of which have national screening systems. The Commission provides non-binding opinions, leaving final decisions to individual countries. It targets critical technologies, infrastructure, resources and data, with a broad view of security encompassing public safety.

The US and EU systems reflect an expanding definition of national security, now encompassing cybersecurity, data protection and critical infrastructure alongside traditional defence concerns.

The role of competition authorities in ensuring fair market practices

In addition to national security mechanisms, governments leverage competition authorities to ensure fair market practices in cross-border M&A. These bodies assess whether transactions could lead to excessive market concentration or reduced competition. According to a recent report by the law firm A&O Shearman, 13 transactions were prohibited and 26 were abandoned worldwide in 2024 due to competition authority requirements. In two-thirds of deals, the parties walked away from the transaction due to authority concerns, up from just under half in 2023.

France stands out as the most interventionist country, with 44% of notified transactions either prohibited or subject to remedies, far exceeding the United States (19%). Moreover, anti-trust regulators are increasingly focused on consolidation strategies, particularly those backed by private equity funds, often requiring monitoring and notification of future acquisitions to prevent market dominance.

The evolving landscape of government intervention in M&A

The last ten years have marked a seismic shift in government oversight of cross-border M&A. A decade ago, countries often incentivised foreign bidders to invest, bringing jobs and regional development. Today, every transaction faces suspicion as governments prioritise economic dominance and security. This trend transcends megadeals, impacting even small and mid-cap transactions.

Several key geopolitical and economic events have fuelled this change. China’s rise as an economic powerhouse, particularly after Europe and the US took years to overcome the subprime crisis, saw its state-backed firms acquire assets globally, prompting alarm in the US and Europe. In response, the US bolstered the CFIUS – established in 1975 – through the 2018 Foreign Investment Risk Review Modernisation Act (FIRRMA).

As a result, Chinese M&A into the US dropped to $221 million in 2024 from $3.6 billion in 2023, reflecting CFIUS’s tightened grip. During Trump’s first presidency, CFIUS notifications and investigations surged.

Europe initially lagged but responded in 2019 with Regulation 2019/452. Effective in 2020, this regulation established a framework for screening foreign direct investments. This shift reflects a broader race for economic supremacy, where protecting strategic assets outweighs the benefits of open markets – a mindset now extending beyond traditionally sensitive sectors.

Sectors under the microscope

Certain industries face intense scrutiny due to their strategic importance. Defence and cybersecurity top the list, especially for firms tied to government or critical infrastructure. Data management, particularly consumer data, has emerged as a focal point, dubbed “the new gold” for its economic and security value.

Energy and infrastructure also draw attention to their role in national stability. Regulators examine the entire value chain, including suppliers, clients, and partners, to assess risks, amplifying the complexity of the review process.

Navigating national security and competition reviews

For companies in sensitive sectors, preparation is paramount. Businesses are encouraged to seek pre-approval from bodies like CFIUS or national bodies early to identify potential issues – whether geographic bidder restrictions, asset carve-outs, or competition concerns – before a deal is marketed. This dual focus on national security and competition is critical, as both can derail transactions. Engaging with competition authorities proactively can mitigate risks and streamline deal progression.

Reviews can last for weeks to several months, depending on the asset’s criticality and the complexity of competition assessments. Inadequate preparation or inexperienced advisors can turn opportunities into costly setbacks.

Impact on deals and multi-jurisdictional challenges

National security and competition reviews affect timelines, valuations, and structures. Delays can erode deal momentum, while concessions – like carve-outs, operational restrictions or divestitures to address market concentration – may reduce value. For example, a tech firm might exclude a data division to gain approval or divest assets to satisfy competition authorities, altering the deal’s financial logic.

Multi-jurisdictional deals compound these challenges, as each country’s national security and competition processes differ, demanding meticulous coordination. European firms eyeing the US or other heavily regulated markets must engage specialised advisors familiar with CFIUS and competition frameworks. Choosing battles wisely is key. Pursuing a US defence contractor, for instance, requires readiness for compromise or withdrawal if concessions undermine the deal’s value. Early engagement with regulators and strategic flexibility are critical.

Leveraging global expertise for cross-border M&A

Government influence and national security have redefined cross-border M&A. These mechanisms reflect a world prioritising sovereignty over openness, from CFIUS’s decisive authority to the EU’s cooperative framework. The added layer of competition scrutiny, particularly in Europe and France, further complicates the landscape. Success in this environment demands foresight, expert advice, and adaptability. With over five decades of experience, deep sector-specific knowledge, and a global footprint, Translink Corporate Finance equips clients to excel amid these challenges, navigating national security and competition reviews to safeguard their ambitions and get the deal done.