Since mid-2023, the Netherlands has had its own foreign direct investment (FDI) regime: the Wet veiligheidstoets investeringen, fusies en overnames (Investments, Mergers, and Acquisitions Act (Security Screening) Act; the “Vifo Act”). Under this regime, certain M&A transactions must be approved beforehand by the Minister of Economic Affairs (the “Minister”). The Minister recently published the 2024 annual report of the Dutch Investment Screening Bureau (“BTI”), which shows a number of developments that are relevant to M&A practice. We will address these in more detail in this blog.
More M&A transactions (wrongly) reported in 2024
2024 was the first full year in which the Vifo Act was in force. In the second half of 2023, the BTI received 45 notifications, compared to 69 notifications in the whole of 2024. This represents an increase of approximately 50%, but less than expected. By way of comparison, the Netherlands Authority for Consumers and Markets (ACM) receives approximately 110-120 concentration notifications each year. In addition, 14 investigations from 2023 were still pending in 2024.
It is remarkable that 14 of the 69 reported M&A transactions did not fall within the scope of the Vifo Act (in one case, the notification was withdrawn by the notifying party). This suggests that parties still regularly have difficulty determining the correct notification requirement. This is noteworthy, because in practice the BTI is often willing to provide guidance beforehand on the notification requirement, also without a formal notification, in the form of an informal opinion. This prevents unnecessary notifications and the preparation costs and delays involved. However, situations are conceivable in which parties decide to make a notification, even though they are not required to do so, in order to obtain formal confirmation that the transaction falls outside the scope of the Vifo Act.
Investigations into M&A transactions that were wrongly not reported
Transactions requiring notification may not be completed until approval has been obtained from the Minister (i.e., the notification that no review decision is required or that a review decision has been taken). In the event of premature closure (gun jumping), parties run the risk of an administrative penalty of up to €1,030,000 or 10% of the company’s turnover.
To date, the Minister has not imposed any fines for gun jumping, but it is known that several investigations into possible violations are currently pending. The BTI proactively monitors and contacts companies several times a month on average in response to signals about a transaction that may have been wrongly not reported, for instance following reports in the media.
More investigations and more interventions by the BTI: first transaction prohibited
In 2023, not a single transactions was blocked; at most, one was approved subject to conditions. In 2024, three transactions were approved subject to conditions. Those conditions are unknown, because the decisions are not made public (see this blog for the options offered by the Vifo Act). In one case, the transaction was prohibited in its entirety, which suggests that the national security concerns could apparently not be remedied by means of commitments. This increased the intervention rate from 2% (1 in 44) to 6% (4 in 66), still well below the EU average of 11%.
In principle, the initial investigation into the transaction takes eight weeks, but that period may be extended by a maximum of six months if the BTI needs more time (the assessment period is furthermore suspended if the BTI presents formal questions to the parties involved). In 2024, the BTI made use of this extension option on ten occasions. A quarter of all the investigations were completed within 34 days in 2024, and 75% of all the investigations were completed within 66 days. In three cases, the parties were notified that a review decision was required only after a period of more than 250 days.
It is apparent from the 2024 figures that a lengthy initial investigation by the BTI does not necessarily mean that a review decision is also required, i.e., an in-depth investigation if an acquisition activity might pose a risk to national security, in which case conditions may also be attached to the approval.
Type of acquirers varies in terms of country of origin and type
M&A advisors should be aware that the Vifo Act also applies to ‘purely Dutch’ M&A transactions, i.e., where not only the target company but also the acquirer is Dutch (see also this blog).
In 2024, 40% (28) of the reported transactions involved acquirers from the Netherlands, followed by 15% (10) from the US and 7.5% (5) from the UK. In total, 40% of the investors came from outside the EU. Asia and the Middle East accounted for 8 transactions, 2 of which were by Chinese acquirers. It is remarkable that in approximately half of all the reported transactions, the buyer was a strategist (competitor, customer, or supplier) rather than a purely financial investor (such as PE or a sovereign wealth fund).
Expansion of the Vifo Act expected in 2025: six new sectors
The Minister states in the annual report that the BTI’s assessment of investments is becoming increasingly important to prevent threats to national security. After almost two years of the Vifo Act, it is clear that the Dutch FDI regime is likely in the near future to have a greater rather than lesser impact on M&A transactions involving Dutch target companies.
Two developments in particular contribute to this. First, the government’s proposal to add six sectors to the scope of the Vifo Act: (i) biotechnology; (ii) artificial intelligence (AI); (iii) advanced materials; (iv) nanotechnology; (v) sensor and navigation technology; and (vi) nuclear technology for medical applications (see also our previous blog on this subject). The intention is to finalise this expansion before the end of this year. Second, the bill for the Wet weerbaarheid defensie en veiligheid gerelateerde industrie (Act on the Resilience of the Defence and Security-related Industry), which was submitted for consultation last year. This bill consists of three parts, including a sectoral investment test for the defence industry, for which the BTI will be responsible. The bill is expected to be presented to the Lower House in December 2025.
Companies and their M&A advisors are well advised to keep a close eye on any Vifo reporting requirements and to take into account the impact on the process and possibly even the outcome of the transaction.
More information on the Vifo Act and FDI-related questions can be found at the wetvifo.nl information portal.
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