Executive Summary

• Geopolitical developments are driving significant investment into the defense sectors in Europe. Acquisitions and investments in these sectors are likely to require multiple regulatory approvals across merger control, foreign investment / national security control, and foreign subsidies.
• Merger control across the EU and UK is becoming more accommodating for defense deals, with the Commission’s new ‘theory of benefit’ framework and the CMA’s efficiencies guidance expressly recognizing defense readiness, innovation, and scale as part of the competitive assessment.
• Foreign investment screening is moving in the opposite direction — the revised EU FDI Screening Regulation mandates screening in all Member States and even allied-nation investors face increased scrutiny, as recent cases demonstrate.
• The EU’s Foreign Subsidies Regulation (“FSR”) is a further regulatory process that investors may need to navigate, introducing additional deal timing and execution risks.
• Successful deal execution requires an integrated regulatory strategy addressing merger control, FDI screening, and the FSR in parallel — each with distinct logic, timelines, and risk profiles that may require extensive commitments to mitigate.