Let the Data Speak: French Foreign Investment Screening Is No Hurdle for M&A Deals

At the end of 2020, for the first time the French government blocked a foreign direct investment (“FDI”): the envisaged acquisition of France-based company Photonis by U.S. company Teledyne (see PH e-alert here). Only a few days into 2021, 24 hours after a leak in the press revealed preliminary talks between Carrefour and would-be Canadian acquirer Couche-Tard, Mr. Bruno Le Maire, the French Minister of the Economy, Finance and Recovery, publicly announced that he would block the acquisition as a matter of national sovereignty.

Both aborted transactions have caused a lot of hasty reactions and speculation on both sides of the ocean. Some are worried that the French government’s position could deter North American companies (U.S. investors account for 15-20% of FDI in France) from investing in Europe, and France in particular.

This alert does not aim at explaining the (official or unofficial) reasons that have prompted the French government to intervene in both cases. Rather, it looks at facts, as they tell a different story.

Statistics published by the French government show a yearly average of slightly more than 1,350 FDIs for the 3-year period from 2017 to 2019^[1] . Of these, on average 15% (approx. 180) are notified to, and reviewed by, the French Ministry for the Economy and Finance every year. Half of the foreign investors are located in the EU (Germany, and at the time the United Kingdom), half outside of the EU, with the U.S., Canada, Switzerland and Japan leading the pack.

While the French Ministry for the Economy and Finance does not provide more detailed statistics, our experience shows that the vast majority of FDIs reviewed by the French Ministry for the Economy and Finance are unconditionally cleared; only a handful of cases require the acquirer to offer some sort of commitments to alleviate concerns.

In the context of the pandemic, FDI screening has strengthened in almost all developed countries including the United States. The European Commission’s framework encouraging EU Member States to screen FDI has become fully operational as of October 11, 2020. France is no exception to this general movement.

One can certainly not rule out further actions by the French government, but the data speak for itself.

According to EY’s Europe Attractiveness Survey (May 2020), France is Europe’s top destination forFDI (ahead of the UK and Germany).^[2]

Mid-January 2021, President Macron invited foreign investors to the “Choose France” symposium, announcing further company tax reductions, on top of labor law reforms already in place^[3]. Early February 2021, Couche-Tard’s founder declared to Le Figaro newspaper that he has not given up on the idea of acquiring Carrefour (or another retailer), and that both groups are, in the meantime, studying four possible partnerships.

Perceptions should not prevail on reality. Refusals of FDI are rare and a vast majority of French transactions by foreign investors have been and will continue to be approved.