On Monday 28 November, 2022, the European Council formally adopted the new Foreign Subsidies Regulation (FSR), aimed at tackling foreign subsidies which have the potential to distort competition in the internal market.
The FSR impacts M&A deals in the EU through the introduction of a new mandatory and suspensory notification obligation where a transaction results in a concentration and meets certain thresholds. This notification obligation will arise towards the end of 2023.
To help investors and businesses understand how the new regime will impact M&A transactions, we have prepared a cheat sheet with guidance on the new regulation. It includes advice for sponsors and sovereign wealth funds, on what they should do to prepare:
Sponsors
- Start working with your financial advisors to identify and compile a record of financial contributions from non-EU and non-EFTA countries (or state-owned enterprises, such as sovereign wealth funds) to your entire controlled portfolio over the last three financial years and assess whether they were received on market terms.
- Put in place a tracking system and a reporting obligation for investments going forward to assess against the FSR.
- Where applicable, contractual provisions will need to reflect FSR conditionality including an appropriate long-stop date.
Sovereign wealth funds
- Where co-investing in a transaction where the lead sponsor triggers an FSR filing, sponsors and/or the EC may request information from you.
- Determine if financial contributions to investors were provided on market terms.
- Where applicable, contractual provisions will need to reflect FSR conditionality including an appropriate long-stop date.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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