While corporate mergers and acquisitions boomed in 2018, investors from outside of the EU will now have a more difficult time joining or acquiring German businesses.

At the end of 2018, the German federal government passed an amendment to the Außenwirtschaftsverordnung (AWV), Germany’s Foreign Trade and Payments Ordinance. We at the commercial law firm GRP Rainer Rechtsanwälte note that its core function was to tighten the rules for foreign investors from outside of the EU entering the German market via German companies.

The amendment to the AWV concerns sensitive sectors of the economy such as defence and critical infrastructure, including e.g. telecommunications, IT security, the provision of drinking water, payment transactions, power, health services, transport and software. The federal government now has a right of veto over these sectors if an investor wishes to acquire a ten per cent stake in a German business. The threshold was previously set at 25 per cent.

It should be noted, however, that the lowering of the threshold for assessment only applies to sensitive sectors, as there is a desire for Germany to remain an attractive location to foreign investors for M&A transactions. Critics are nonetheless worried that foreign investors will be put off by these stricter rules.

Investors and entrepreneurs can turn to lawyers who are experienced in the field of M&A.