Antitrust Law & Foreign Trade Control: The Comprehensive Guide for Entrepreneurs on M&A and Investments

Competition law, investment reviews and critical regulations between signing and closing – what you as an entrepreneur need to know

You're planning to sell your company, make an acquisition, or bring in external investors – and in doing so, you encounter terms like antitrust law, merger control, foreign trade regulations, or gun jumping. For many entrepreneurs, these topics initially seem technical and abstract. In practice, however, they often determine whether a transaction can even be completed – and under what conditions.

The period between signing the purchase agreement and closing is one of the most sensitive phases of the entire transaction process. It is not merely a transitional period, but a highly regulated timeframe in which government authorities review the transaction, legal boundaries must be strictly observed, and operational decisions are severely restricted.

Those who underestimate this phase risk delays, conditions, or even the failure of the transaction. Conversely, those who understand it and approach it systematically gain planning certainty and significantly increase the likelihood of a successful closing.

The phase between signing and closing – legally and economically crucial.

Many transactions have a period of several months between signing and closing, and often considerably longer in international or regulatory cases. This period is characterized by official approval processes, contractual obligations, and a finely balanced approach to cooperation and legal separation.

The reason for this interim phase lies in the public interest in functioning markets and economic security. Government authorities examine whether the transaction complies with competition law and whether security-related interests are affected. At the same time, the target company remains legally and economically independent until closing – with all the resulting consequences.

For entrepreneurs, this means that the economic success of a deal depends not only on the agreement between buyer and seller, but also significantly on the ability to manage this intermediate phase in a regulatory-compliant manner.

Antitrust law as the foundation of transaction control

Antitrust law forms the central framework for assessing mergers and acquisitions. It protects competition and aims to prevent market structures from being altered by mergers or agreements in a way that leads to price increases, reduced innovation, or barriers to market entry.

Antitrust law is relevant to M&A transactions in three respects. Firstly, through the prohibition of cartels, which forbids agreements that restrict competition. Secondly, through the prohibition of abuse of market power, which regulates the conduct of companies with market dominance. And finally, through merger control, which directly targets transactions.

A key principle is the so-called self-assessment. Companies must assess for themselves whether their agreements are permissible under antitrust law. Unlike in many other areas of law, there is no prior approval procedure – outside of merger control.

Especially in the context of M&A transactions, the definition of the group privilege is crucial. This privilege allows for coordination within an economic entity. However, such an entity does not exist before closing. The buyer and the target company remain separate market participants, meaning that any coordination can be relevant under antitrust law.

Merger control: The central approval process

Once certain revenue thresholds are exceeded, a transaction must be reported to the relevant authorities. In Germany, this is done by the Federal Cartel Office, and at the European level by the European Commission.

The authorities are examining whether the transaction will significantly impede effective competition. This involves analyzing market shares, competitive structures, barriers to market entry, and potential effects on prices and innovation.

The procedure is formalized and typically consists of a preliminary review and – in cases of more serious concerns – a second review phase. During this time, a strict prohibition on enforcement applies.

This prohibition on implementation is one of the central principles of merger control. It prohibits not only the legal implementation of the transaction, but also any de facto anticipation of the merger. Even the mere appearance that the buyer is exerting premature influence on the target company can be considered a violation.

The sanctions are substantial. Fines in the tens of millions are not uncommon. Accordingly, a clean organizational separation between the parties until closing is of paramount importance.

Gun Jumping: The Underestimated Risk

Gun jumping refers to any form of premature implementation of a transaction before its antitrust approval. This can occur through both formal measures and de facto influence.

Typical risk areas include the exchange of competitively sensitive information, the coordination of strategic decisions, or the de facto control of the target company by the buyer.

In practice, violations often arise unintentionally, stemming from an overly narrow understanding of "cooperation" during the interim phase. This is precisely why it is crucial to define clear rules for information exchange, decision-making processes, and governance structures.

Foreign trade control: Investment screening as a security right

Alongside antitrust reviews, foreign trade controls are becoming increasingly important. They come into play particularly when investors from outside the European Union acquire a German company.

Unlike antitrust law, the focus here is not on competition, but on national security. The examination specifically examines whether critical technologies, infrastructure, or security-relevant companies are affected.

The legal basis is the Foreign Trade and Payments Act and the Foreign Trade and Payments Ordinance. These are supplemented by European regulations on investment screening.

The procedures can be complex and time-consuming. They often lead to conditions or extended review periods. In sensitive sectors, investment control should therefore be integrated into the transaction structure at an early stage.

New regulatory dynamics: Foreign Subsidies Regulation

With the Foreign Subsidies Regulation, the European Union has created another instrument to address distortions of competition caused by state subsidies from third countries.

This instrument is gaining importance, particularly in larger, internationally oriented transactions. It obliges companies to disclose subsidies received and can lead to additional audits.

For those involved in transactions, this means that regulatory complexity continues to increase – and requires even earlier and more integrated planning.

Behavior between signing and closing: Cooperation with limits

The interim phase requires particular discipline in the interaction between buyer and seller. On the one hand, there is a legitimate interest in preparation and integration. On the other hand, antitrust regulations must be strictly observed.

Information exchange is one of the most sensitive areas. While historical and aggregated data are generally unproblematic, strategic planning, pricing structures, or customer information can pose significant risks.

In practice, mechanisms such as clean teams or structured information releases have become established for this purpose. The aim is to enable necessary preparation without exceeding antitrust limits.

Material Adverse Change and Risk Distribution

Another key aspect is the risk allocation between signing and closing. MAC clauses define the circumstances under which the buyer can withdraw from the transaction.

These clauses are regularly the subject of intensive negotiations. They must be designed in such a way that they reflect genuine economic risks on the one hand, but on the other hand do not become a de facto withdrawal option in the event of every negative development.

Closing Conditions and Regulatory Reality

The completion of a transaction regularly requires the fulfillment of certain conditions. These include, in particular, antitrust approvals, investment control permits, and compliance with contractual obligations.

These conditions reflect the regulatory reality of modern M&A transactions. Without them, the deal remains legally incomplete – regardless of the parties' economic agreement.

Remedies: When permits come with conditions

When authorities identify competitive or security concerns, they often only approve transactions subject to conditions.

These so-called remedies can be structural in nature, such as the sale of parts of the company, or behavioral, such as obligations to open up the market.

Their economic significance is considerable. They can substantially influence the value of a transaction and therefore must be anticipated early and contractually secured.

Conclusion: Regulation determines success

Antitrust law and foreign trade control are not secondary issues, but central elements of every M&A transaction.

The period between signing and closing determines whether a deal can be implemented smoothly or gets stuck in regulatory hurdles.

Those who approach this phase in a structured manner, understand regulatory requirements and integrate them early on, create the basis for a successful conclusion.

Or, to put it more pointedly:

The deal is not decided by the negotiation – but by the ability to implement it in a regulatory manner.