Over the past decade, the number of countries with foreign direct investment (FDI) screening regimes has more than doubled. What was once a niche, rarely-used regulatory tool has become a standard feature of global deal-making and a routine consideration in cross-border M&A, including U.S. to U.S. transactions that involve the indirect acquisition of foreign subsidiaries. As jurisdictions continue to strengthen their FDI screening regimes, parties are seeing more U.S.-led deals encounter longer and more intrusive reviews and increasingly complex conditions as a condition of approval.
For a few transactions, FDI regimes have become an outright barrier. Most recently, on April 27, 2026, China’s National Development and Reform Commission (NDRC) ordered Meta to unwind its $2 billion acquisition of Manus, an AI-agent startup. As FDI regulators around the world look upon the U.S. with greater suspicion, parties to cross-border transactions need to take a practical but risk-aware approach to this new transactional environment.
From U.S. Advocacy to U.S. Exposure
The U.S. has long been regarded as the driving force behind the global proliferation of FDI screening regimes. The U.S. FDI regulator—the Committee on Foreign Investment in the United States (CFIUS)—has by Congressional mandate worked to establish similar regimes in many historically allied nations. Moreover, the CFIUS rules have served as a significant conceptual blueprint for the EU Cooperation Mechanism, the UK’s National Security and Investment Act, as well as other regimes across countries in Asia-Pacific. The irony now emerging is that these regimes inspired—or directly requested—by the U.S. are now being deployed against U.S.-origin acquirers. This is particularly the case in sectors such as technology, critical minerals, and defense. While U.S. investors previously encountered very few regulatory hurdles to their overseas investments, they now face scrutiny even in allied jurisdictions. These hurdles can create mandatory and suspensory filing obligations and require formal clearance before deals are able to close. Some recent notable examples of some of the more aggressive FDI regulator responses to U.S.-led foreign investment can be found below.
Recent Examples
On April 27, 2026, as noted above, China’s National Development and Reform Commission (NDRC) ordered Meta to unwind its $2 billion acquisition of Manus, an AI-agent startup. The announcement came after four months of regulatory scrutiny by multiple Chinese authorities and, as the ruling was issued post-closing, Meta had already begun the process of onboarding Manus personnel and integrating the company into the Meta group. One of the most interesting features of this decision was that Manus had relocated its headquarters from China to Singapore in 2025, and yet the NDRC asserted jurisdiction on the basis of the technology’s Chinese origin, the nationality of the founders, and the company’s historical ties to Chinese data.
In April 2026, a political party in Brazil filed a petition with the Supreme Federal Court (STF) seeking to block USA Rare Earth Inc.’s proposed $2.8 billion acquisition of Serra Verde Group, a large-scale rare earths elements producer in Brazil. The petition argued that the STF should block the sale on the basis that the rare-earth deposits constitute a strategic national asset and that the sale could undermine Brazilian sovereignty over critical minerals. As a result of the petition, the court temporarily suspended the sale pending further review. As Brazil does not currently have an FDI screening regime covering critical minerals (compared to other countries1), this has been framed as a constitutional challenge.
In October 2023, the French Ministry of Economy vetoed the proposed $245 million acquisition by U.S.-headquartered Flowserve Corporation of Canadian-headquartered industrial steel valve manufacturer, Velan Inc. Velan had global operations and subsidiaries, including two subsidiaries in France that manufactured critical values for French nuclear-powered submarines and aircraft carriers. The French government attempted to impose stringent governance and localization remedies such as ringfenced operations and various commitments on certain sensitive exports. Ultimately, due to the many regulatory and commercial factors required by the French government in order for the deal to proceed, Flowserve Corporation abandoned the transaction.
Key Takeaways
- Consider Multi-Jurisdictional Filing Requirements Early: With more than 100 jurisdictions now operating some form of FDI screening regime, many deals trigger mandatory, suspensory filings that must be cleared before closing. Target companies that map their activities against sensitive sectors in all relevant jurisdictions—such as artificial intelligence, critical minerals, defense, or semiconductors—and bake realistic review timelines into the transaction calendar are far better positioned to keep the process predictable and avoid costly, timely delays. Engaging with counsel early on to make initial assessments of which FDI regimes may apply to a given transaction is increasingly the norm. It is also equally important to ensure the FDI assessments are closely aligned and coordinated with other regulatory workstreams, such as antitrust and competition, particularly to ensure consistency and harmonization across regulatory submissions, both in substance and strategy.
- Anticipate Conditionality and/or Mitigation Requirements: Although total vetoes account for a very small percentage of formally screened cases, clearances subject to conditions or mitigation measures are becoming increasingly common, particularly in jurisdictions such as the European Union. Mitigation measures span a broad spectrum, but common measures include requirements to maintain local personnel or capabilities, restrictions on the use or transfer of intellectual property, separate IT systems for European operations, the appointment of authorized IT-security officers, and ongoing reporting obligations, including notice of future disposals. In cases where transactions relate to operations in sensitive sectors, it is worthwhile to anticipate potential conditions early and engage proactively with regulators. Mitigation can affect bidder selection, deal structuring, risk allocation and, in some cases, the commercial viability of the target’s post-acquisition operating model.
- Relocations Don’t Insulate Companies from Regulatory Reach: As evidenced by the recent Meta/Manus case outlined above, a holding company incorporated in another jurisdiction does not provide a regulatory shield if the underlying technology, talent, or data can be traced back to a jurisdiction that claims to have regulatory oversight. It is clear that AI and frontier technology companies are increasingly being treated as strategic assets by host countries and therefore relocations must be more than just legal restructurings. This is particularly noteworthy for any deals involving Chinese-origin strategic technology.
- U.S. Investors Are the Most Scrutinized Source of FDI in Europe: Having a U.S. acquirer is no longer a neutral (or automatically reassuring) factor in European FDI reviews. The European Commission’s Fifth Annual FDI Report (covering the 2024 year) revealed that the U.S. was the top foreign investor in the EU in 2024, representing 40 percent of all cases notified to the EU Cooperation Mechanism. The UK accounted for 11 percent and China accounted for 9 percent. These statistics do not mean that U.S. deals are blocked at a higher rate—as clearance without any conditions is granted in approximately 86 percent of formally screened cases—however, it does mean that U.S. investors are subject to the greatest volume of regulatory scrutiny.
For U.S. investors—and target companies being bought by U.S. investors—this shift requires a change in approach. Screening processes are no longer a box-ticking exercise but rather a key component of deal strategy. Parties must remain vigilant to evolving regulatory obligations, potential national security risks, and the substantial impact these reviews can have on both deal certainty and closing timelines. Most crucially, parties must realize that foreign regulators may no longer rubber-stamp U.S.-led investments or acquisitions.
For questions regarding any of the matters discussed, please contact Josh Gruenspecht, Michael Casey, Seth Cowell, Stephen Heifetz or any member of Wilson Sonsini’s National Security and Trade practice.
[1] Other jurisdictions, including Canada, Australia, and the UK, have tightened their FDI screening regimes to capture transactions involving critical minerals.
