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Foreign direct investment screening: Germany is getting tougher with non-European investors

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02 August 2018

On 1st of August 2018, the German government issued the first ever (precautionary) order prohibiting the acquisition of a German business by a foreign investor – the Leifeld case.

​The German government is prepared to use its powers to block foreign direct investments. The proposed acquisition of the German mechanical engineering company Leifeld is the landmark case in which, for the first time ever, Germany has prohibited a foreign investor from acquiring a German business. Even after it was announced that the Chinese acquirer dropped the proposed acquisition, the German government reportedly issued a precautionary blocking decision. The Leifeld case underlines the change in attitude based on which the German rules on foreign direct investment control are administered.

Going forward, foreign investors will have to analyse even more thoroughly than before whether the respective target business presents any reason based on which the German government could intervene. Investors may also take into consideration how to profile themselves and their proposed acquisition with a view to public perception and tone from the top in the ministry. These preparations require ground work at an early stage and need to be driven forward together with a team of professional advisors. They cannot be taken seriously enough.

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