European and German Controls on Foreign Direct Investment

Abstract

Germany has a sound legal system and offers a reasonable policy environment for acquisitions by foreign companies. According to German law, approval is needed for M&As in specific industries. In the military industry, for example, acquisitions to take ownership of more than a 25% stake in a company have to be assessed and authorized by the German government. It is necessary to make a declaration when acquiring stakes of 10% or more in banks and financial service companies and approval is needed from the financial service authority. There are similar regulations in the insurance industry. Assets transfers (not ownership transfers) in the sectors energy supply, telecommunications, transportation, natural resource exploitation, chemicals, and construction require approval from government authorities. German law also dictates that assessments have to be carried out for acquisitions of listed companies or any firm that has a significant impact on its industry.