Entry to the EU through acquisition: A guide for non-EU buyers

Mgr. Vojtěch Sucharda
Mgr. Vojtěch Sucharda
16.3.2026 | ARROWS law firm

If you are a non-EU company planning to acquire a business in Germany, Spain, Poland, Austria, the Czech Republic, or anywhere else in the European Union, you need to understand that this journey involves far more than simply negotiating a purchase price. Foreign investment screening, competition clearances, the Foreign Subsidies Regulation, regulatory approvals, and procurement restrictions can all derail your transaction if you are not prepared. 

Photograph captures an attorneys for foreign investment screening.

Quick summary 

Non-EU acquisition of EU businesses involves substantially greater regulatory complexity than domestic deals:

  • Foreign investment screening is the new norm: FDI regimes in member states and the EU framework actively screen non-EU capital. Early assessment is critical.
  • The Foreign Subsidies Regulation (FSR) is a game-changer: If you have received significant financial contributions from non-EU states, you may need EC clearance even if competition issues aren't present.
  • Merger control is rigorous: Standard turnover thresholds apply, but "killer acquisition" theories allow authorities to review even smaller deals in tech/pharma sectors under certain conditions.
  • Integration planning starts early: EU employment laws (TUPE) and supply chain directives impose rigid obligations that must be factored into the valuation and integration plan.

Understanding the EU acquisition landscape for foreign buyers

The European Union presents attractive opportunities for non-EU companies seeking to expand into a developed market with 450 million consumers, advanced infrastructure, and established business practices. However, the path to acquisition in the EU has become significantly more complicated.

The EU's approach to foreign investment has fundamentally shifted. Following vulnerabilities exposed by geopolitical tensions and supply chain disruptions, European policymakers have implemented a framework designed to protect critical infrastructure from foreign control.

For non-EU buyers, this means that acquisitions that might have received approvals a few years ago now face extended timelines, conditional approvals, or potentially outright prohibition. The stakes are high: failing to account for these regulatory requirements can result in penalties, transaction delays, or forced divestitures.

The complexity becomes even more pronounced when you consider that EU member states operate their own screening mechanisms alongside EU-level rules. Germany has one screening regime, the Czech Republic has another, Spain has yet another.

While the EU has been harmonizing these rules through Regulation (EU) 2019/452, significant differences remain in practice. What qualifies as a sensitive investment in one country may be treated differently in another.

Combined with competition law reviews, the Foreign Subsidies Regulation (FSR), and procurement restrictions, the acquisition process demands expert guidance from the outset.

ARROWS Law Firm's lawyers work regularly with non-EU clients navigating this landscape. We understand that your familiarity with acquisition law in your home jurisdiction does not translate directly to the EU market. This article will equip you with the knowledge you need to understand the key stages, anticipate obstacles, and make informed decisions about how to structure your acquisition.

The foreign direct investment screening framework: what non-EU buyers must know

One of the most significant hurdles that non-EU buyers face when acquiring businesses in the EU is the foreign direct investment (FDI) screening mechanism. This is not a one-time approval process; rather, it is a layered system combining EU-level cooperation requirements with individual member state screening regimes.

At the EU level, the Foreign Direct Investment Screening Regulation establishes a framework for cooperation regarding foreign investments that may affect security or public order. Under this regulation, EU member states notify the Commission and other member states of foreign investments that meet certain thresholds.

If security risks are identified, member states can impose conditions on the investment, require divestitures, or block the transaction entirely. For non-EU buyers, the critical understanding is that this screening is not automatic. However, the risks of inadvertently triggering enhanced scrutiny—or failing to file when required—are substantial. Transactions that appeared routine at the negotiation stage have faced retroactive screening investigations months after closing.

Individual EU member states have their own FDI screening mechanisms that operate independently of the EU-level framework. For example, the Czech Republic operates under the Act on the Examination of Foreign Investments, which requires non-EU investors to obtain a permit before acquiring an "effective degree of control" in sensitive sectors.

A transaction that does not require EU-level notification may still require notification at the national level, triggering separate review periods and decision timelines.

The definition of "sensitive sectors" and "critical infrastructure" is broad. They typically include military equipment, energy, transport, telecommunications, artificial intelligence, semiconductors, and biotechnology. Member states also have discretion to screen investments outside these formal categories if they believe the investment threatens national security.

ARROWS Law Firm specializes in FDI screening and has guided numerous non-EU clients through this process. The lawyers at ARROWS Law Firm can assess whether your transaction will trigger screening requirements, identify the applicable member state procedures, and advise on timing strategies that minimize deal delays. Contact us at office@arws.cz to discuss your specific acquisition and the FDI screening implications.

1. Do I need to file an FDI screening notification even if I am from a friendly country?
Yes, the screening framework generally applies to all non-EU investors. While the investor's country of origin is a factor in the risk assessment, it does not automatically exempt you from notification requirements if you are acquiring a business in sensitive sectors or if the transaction meets the statutory thresholds. ARROWS Law Firm can advise you on whether your specific investor profile may receive more favorable treatment.

2. What happens if I do not file an FDI notification when required?
Failure to notify can result in substantial fines—often calculated as a percentage of the worldwide turnover or fixed amounts depending on the member state. More importantly, the transaction may be deemed void or you may be required to unwind it entirely, meaning you would be forced to divest the acquired company. Additionally, you may lose voting rights in the acquired entity until approval is granted. If you are uncertain about notification requirements, write to us at office@arws.cz.

3. How long does an FDI screening review typically take?
Timelines vary by jurisdiction. In many member states, the initial phase review period is between 30 to 45 days. However, this timeline can be extended significantly if the authorities determine that an in-depth investigation is necessary or if the clock is stopped due to information requests. ARROWS Law Firm structures transactions to minimize screening timelines and works closely with regulatory authorities to ensure efficient processing.

Competition law review, merger control, and the foreign subsidies regulation

Beyond FDI screening, non-EU buyers must satisfy EU and national competition law requirements, as well as the Foreign Subsidies Regulation (FSR).

Merger control

The EU Merger Regulation (EUMR) applies to concentrations—including acquisitions of shares or assets—that meet certain turnover thresholds and have an "EU dimension." When the thresholds are met, the European Commission reviews the proposed merger to determine whether it would significantly impede effective competition.

The turnover thresholds for an "EU dimension" are substantial. Generally, the regulation applies if the combined worldwide turnover of all the parties to the concentration exceeds EUR 5 billion and the EU-wide turnover of each of at least two parties exceeds EUR 250 million.

For transactions meeting these thresholds, pre-merger notification to the European Commission is mandatory.

When the turnover thresholds are not met at the EU level, national competition authorities in each EU member state may review the transaction under their national merger control laws. The thresholds vary significantly. A transaction that escapes EU-level review may still require separate notifications in multiple member states.

Foreign subsidies regulation (FSR)

Since its full application, the Foreign Subsidies Regulation has become a "third hurdle" for M&A deals, alongside FDI and Merger Control. Non-EU buyers must notify the European Commission if the acquired company generates an EU aggregate turnover of at least EUR 500 million and the parties received combined foreign financial contributions of more than EUR 50 million.

"Foreign financial contributions" is defined very broadly, covering capital injections, loans, tax exemptions, and even the provision of goods or services at non-market rates by state-linked entities. Failure to notify under the FSR carries the same potential penalty as under merger control—up to 10% of aggregate turnover.

For non-EU buyers entering the EU market, especially those with any state backing or subsidies, the interplay between Merger Control and FSR is critical.

ARROWS Law Firm guides non-EU acquirers through competition law analysis, FSR assessments, and merger control filings. We understand the substantive standards applied by the European Commission and national authorities. Contact us at office@arws.cz to discuss whether your proposed acquisition requires merger control or FSR notification.

1. Do non-EU buyers face different scrutiny in merger control reviews than EU buyers?
The Commission applies the same substantive competition standards to all acquirers. However, under the Foreign Subsidies Regulation, non-EU buyers receiving financial contributions from non-EU governments face specific scrutiny to ensure those subsidies do not distort the internal market. ARROWS Law Firm can advise you on whether your funding structure triggers FSR risks.

2. If I acquire a business in one EU member state, do I also need competition clearance from other member states?
It depends on the turnover thresholds. If the transaction meets the EU dimension thresholds under the EUMR, you notify only the European Commission unless a referral takes place. If the transaction does not meet the EU thresholds, you must check the national thresholds of every member state where the target or buyer has turnover. ARROWS Law Firm can analyze which approvals are required for your specific deal.

3. How long does merger control review typically take?
The European Commission aims to complete its Phase I review within 25 working days of receiving a complete notification. However, pre-notification discussions can take months. If the Commission opens a Phase II investigation, it takes an additional 90 working days, extendable. National reviews vary; for instance, the Czech Office for the Protection of Competition typically issues Phase I decisions within 30 days.

Sector-specific restrictions and the "Buy European" procurement agenda

Non-EU buyers must also grapple with increasingly restrictive procurement rules and sector-specific limitations. The EU implements tools like the International Procurement Instrument (IPI) and specific directives to ensure fair competition and protect strategic assets.

For non-EU acquirers, a significant development is the restriction on participation in EU public procurement tenders. Under the IPI, the EU can restrict access to its public procurement market for bidders from countries that do not offer reciprocal access to EU companies.

If your country of origin is subject to an IPI measure, the target company might face score adjustments or exclusion from tenders.

Furthermore, in the utilities sector, Directive 2014/25/EU allows contracting entities to reject bids if the proportion of products originating in third countries exceeds 50% of the total value of products constituting the tender. A non-EU buyer must assess whether the acquisition will impair the target's ability to bid for public contracts.

For non-EU acquirers, the practical implication is clear: your post-acquisition strategy must account for these restrictions. If you are a non-EU company, you may need to adopt a different operational structure, establish an EU subsidiary with independent management, or accept reduced access to certain EU procurement opportunities.

ARROWS Law Firm's lawyers are experienced in advising non-EU acquirers on how to structure businesses to maximize EU market access while remaining compliant. Write to us at office@arws.cz to discuss how these rules apply to your proposed acquisition.

Planning your acquisition strategy: target selection and initial assessment

Before committing resources to a specific acquisition target, non-EU buyers should conduct a preliminary regulatory assessment. This step is crucial to identify "deal-breakers" early.

The first step is to identify the target company's primary business activities and determine whether it operates in sectors that attract heightened regulatory scrutiny. Acquisitions of companies in defense, energy, critical digital infrastructure, AI, and dual-use technologies typically face rigorous screening.

Next, analyze the turnover of both your company and the target to determine whether merger control notification will be required. Calculate worldwide turnover, EU turnover, and member state turnover. Simultaneously, assess your "financial contributions" from non-EU governments over the last three years to determine if an FSR filing is triggered.

You should also investigate the target's existing regulatory licenses. Many acquisitions in regulated industries—banking, insurance, telecommunications, energy—require specific approvals from sector regulators in addition to general FDI screening.

At this stage, engage ARROWS Law Firm to conduct a preliminary regulatory assessment. The lawyers at ARROWS Law Firm can quickly identify the major regulatory obstacles, estimate the timeline for obtaining approvals, and recommend a structuring approach. Contact office@arws.cz to discuss your acquisition target.

Due diligence: uncovering regulatory, legal, and operational risks

Due diligence is the critical phase where non-EU buyers must systematically investigate the target. In the EU, this extends beyond financial and legal review to include specific EU regulatory compliance.

Legal & Regulatory: Review corporate governance, ownership structure, and regulatory licenses. Crucially, assess whether the target is subject to the Corporate Sustainability Due Diligence Directive or national supply chain acts, which impose strict obligations regarding human rights and environmental standards.

Financial & Tax: Tax due diligence is vital due to variations in tax regimes and the complexity of EU cross-border tax directives. Understanding the target’s transfer pricing positions is essential.

Employment: EU employment law is highly protective. Acquisitions may trigger change-of-control provisions in employee contracts or collective bargaining agreements. In many states, the Transfer of Undertakings regulations mean that employees automatically transfer to the new owner or retain their rights with protection against dismissal.

Environmental (ESG): Environmental liabilities in the EU are strict under the polluter pays principle. You must assess compliance with the EU Emissions Trading System (ETS) if applicable, and potential soil/water contamination liabilities.

ARROWS Law Firm's lawyers conduct comprehensive due diligence for non-EU acquirers across multiple EU jurisdictions. We combine deep understanding of Czech law with expertise in neighboring legal systems. Write to office@arws.cz to discuss how ARROWS Law Firm can support your due diligence process.

1. Should I conduct separate due diligence in each EU member state where the target operates?
Yes. While EU directives harmonize many laws, they are transposed into national law with variations. Employment law, tax, and specific regulatory requirements differ significantly between member states (e.g., between Poland and Germany). ARROWS Law Firm coordinates due diligence across multiple EU jurisdictions.

2. How much time should I budget for due diligence?
For a straightforward acquisition, 6-8 weeks is typical. For complex transactions involving multiple jurisdictions or regulated industries, 3 to 4 months may be necessary.

3. What happens if due diligence uncovers significant issues?
You can renegotiate the purchase price, require the seller to remediate issues before closing (Conditions Precedent), obtain Warranty & Indemnity (W&I) insurance, or terminate the transaction. ARROWS Law Firm helps you analyze the materiality of issues and negotiate appropriate remedies.

Structuring the transaction: share purchase versus asset purchase

The choice between a share purchase (acquiring the legal entity) and an asset purchase (acquiring specific assets and liabilities) is fundamental.

Share purchase

You acquire the entity "warts and all," including all past liabilities (tax, environmental, legal). However, licenses and contracts generally remain in force, and tax losses may be preserved. This is generally operationally simpler and preferred for large corporate acquisitions.

Asset purchase

You select specific assets and assume only agreed liabilities (though TUPE laws often force the transfer of employees regardless). This avoids inheriting unknown past liabilities. However, it is administratively burdensome: contracts must be assigned, and licenses often cannot be transferred and must be reapplied for.

For non-EU buyers, a share purchase is often the default for cross-border M&A to ensure business continuity, but careful indemnities are required. ARROWS Law Firm can advise you on which structure is optimal for your specific situation. Contact us at office@arws.cz.

Regulatory approval timelines and deal coordination

A typical acquisition timeline involving a non-EU buyer is governed by the "long stop date"—the deadline by which all regulatory approvals must be obtained.

  • Signing: Parties sign the Share Purchase Agreement (SPA).
  • Filing: Notifications are submitted to competition authorities (Merger Control), FDI authorities, and the European Commission (FSR) if thresholds are met.
  • Review: Timelines vary from 1 month to over 5 months depending on the complexity and jurisdiction.
  • Closing: Can only occur after all mandatory clearances are received.

Closing before approvals ("gun-jumping") is illegal and carries heavy sanctions. ARROWS Law Firm manages these timelines to ensure coordination and avoid costly delays. If you are planning a complex EU acquisition, contact us at office@arws.cz.

Key regulatory and operational risks for non-EU acquirers

Risks and sanctions

How ARROWS (office@arws.cz) helps

FDI screening rejection or transaction unwinding: Non-EU buyers may face regulatory prohibition or forced divestiture if the transaction threatens security or public order and wasn't cleared.

FDI screening analysis: We assess FDI requirements in the EU and member states (CZ, DE, PL, AT, ES), prepare notifications, and negotiate with ministries to clear the deal.

Merger Control & FSR Fines: Failure to notify under the EU Merger Regulation or Foreign Subsidies Regulation can result in fines up to 10% of worldwide turnover.

Competition & FSR compliance: We analyze turnover and foreign financial contribution thresholds, file necessary notifications to the EC or national authorities, and manage the clearance process.

Employment law compliance failures: Breach of TUPE (transfer of undertakings) rules or failure to consult works councils can lead to litigation and invalidity of transfer measures.

HR Due Diligence: We identify all employment obligations, calculate severance/transfer costs, and ensure compliance with local labor codes and EU directives.

Environmental liability: Under the "polluter pays" principle, the new owner may be liable for historical contamination.

Environmental assessment: We coordinate technical assessments and negotiate indemnities or insurance solutions for environmental risks.

Procurement restrictions (IPI): Loss of eligibility for EU public tenders due to non-EU ownership or lack of reciprocity.

Procurement strategy: We analyze the target’s public sector reliance and advise on corporate structuring to maintain market access.

Conclusion

Acquiring a business in the EU as a non-EU buyer is an achievable objective, but it requires professional guidance. The regulatory landscape—comprising FDI screening, Merger Control, the Foreign Subsidies Regulation, and national laws—is multi-layered.

ARROWS Law Firm's lawyers have extensive experience guiding non-EU acquirers through this process. We combine in-depth knowledge of Czech law with expertise in CEE and EU-wide regulations. Our international experience means we understand the differences between your home jurisdiction's legal framework and the EU environment.

If you are considering an acquisition in the EU, contact the lawyers at ARROWS Law Firm at office@arws.cz. We will help you navigate the regulatory landscape and close your deal successfully.

FAQ – Frequently asked legal questions about entry to the EU through acquisition

1. How do I know whether my acquisition requires FDI screening notification?
You must check if the target operates in a "sensitive sector" (defense, energy, IT, health, dual-use goods) and if you are acquiring a relevant threshold of voting rights (often 10% or 25%) or control. Rules vary by country (e.g., Czech Act No. 34/2021, German AWV). Contact ARROWS Law Firm for a multi-jurisdictional assessment.

2. What is the Foreign Subsidies Regulation (FSR)?
It is an EU regulation requiring notification if the transaction value is significant and the parties have received over EUR 50 million in "financial contributions" from non-EU countries in the last 3 years. It aims to prevent market distortion by state-subsidized foreign buyers.

3. What happens if I close my acquisition without obtaining required approvals?
You risk fines up to 10% of turnover (for Merger Control/FSR) or up to 1-2% of turnover (for FDI, depending on the state). The transaction can be declared void, or you may be forced to divest the business (unwind the deal).

4. Can I exclude the target's past liabilities in a share deal?
Generally, no. In a share deal, the target retains its liabilities. You mitigate this risk through thorough due diligence and by negotiating warranties and indemnities (W&I) in the Share Purchase Agreement.

5. How does the "Buy European" agenda affect my acquisition?
Tools like the International Procurement Instrument (IPI) can restrict access to public tenders for companies from countries that don't reciprocate market access. If your target relies on public contracts, you must assess if your ownership will disqualify them.

6. What are the key employment law issues?
The "Transfer of Undertakings" (TUPE) principle protects employees' rights during M&A. You generally cannot dismiss employees solely because of the acquisition, and existing employment terms transfer automatically in asset deals.

Disclaimer: The information contained in this article is for general informational purposes only and serves as a basic guide to the issue as of 2026. Although we strive for maximum accuracy, laws and their interpretation evolve over time. We are ARROWS Law Firm, a member of the Czech Bar Association (our supervisory authority), and for the maximum security of our clients, we are insured for professional liability with a limit of CZK 400,000,000. To verify the current wording of the regulations and their application to your specific situation, it is necessary to contact ARROWS Law Firm directly (office@arws.cz). We are not liable for any damages arising from the independent use of the information in this article without prior individual legal consultation.

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