A major shift in the world’s advanced economies’ foreign investment policy has significant implications for the M&A world.

Growing scrutiny of overseas investment has been most notable from the United States, but other advanced economies have also tightened conditions under which they will allow foreign entities to take full or partial ownership of domestic businesses and operations. As a result, more nuanced regulatory strategies will be necessary to ensure deals are pushed over the line.

The US, which has long maintained an open investment policy, has just enacted the Foreign Investment Risk Review Modernization Act (FIRRMA), designed to address evolving national security concerns. Canada, Australia and Germany haven’t been far behind in tightening foreign investment regulations, while the UK and European Union are also developing new regimes.

These new regulations focus on national security implications of investments, not the national interest or antitrust concerns of many pre-existing regimes.

Driving this new scrutiny are record levels of investment—mostly from Chinese sources—in the world’s advanced economies, increased activity by state-owned enterprises and sovereign entities, as well as a focus on technology and infrastructure.

These developments reflect expanding concerns about national security vulnerabilities and, while China has been singled out in all but name, the new regulations will affect foreign investment from all regions. The policy shifts have impacted deal making even in advance of implementation of the new regulations.

Read our Q4 2018 M&A Spotlight for tips on how to navigate these changes.

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