Private equity transactions often involve complex investment structures and chains of control, including multiple layers of investors with differentiated rights and various financial instruments which are often subject to pre-closing or post-closing syndication. These structural specificities contribute to a particular complexity, in particular in cross-border transactions involved various authorities, in assessing FDI implications, preparing the filing, and anticipating the review timeline.

These challenges do not end at the deal’s closing. Once a fund owns a business, any follow-on investments in sensitive sectors may require new FDI approvals – especially if the company is now deemed “foreign-controlled.” Regulatory commitments, such as maintaining certain operations in the relevant jurisdiction or limiting investor rights, can further restrict how funds manage their investments. Given the finite investment horizon typical of private equity funds, these FDI-related constraints can significantly affect growth and build-up strategies, ultimately impacting the value creation and exit planning.

At the exit stage, FDI screening can affect the identity of the persons who can buy the business and on what terms. Foreign bidders may reduce their offers or drop out due to potential regulatory delays or restrictions, while local buyers may face fewer hurdles. This can influence deal value, timing, and competitive dynamics. For PE firms, this underscores the need to factor FDI strategy into every stage of the investment cycle – from entry to exit.