FDI Framework

The Federal Republic of Germany is an open market economy, in which the engagement of foreign companies and investors is welcome. The federal government sees foreign direct investment (FDI) as an important initiator of economic growth and employment in the country.

A company looking to invest in Germany can do so in different ways. Foreign direct investment takes two forms:

Company Establishment (Greenfield Investment)

The establishment of a company in Germany is a straightforward process. Foreign investors can choose freely between available legal company forms for their business projects. Foreign company establishments in Germany are not subject to reviews under German foreign trade regulations.

For further information about business establishment in Germany read

Mergers and Acquisitions (M&A)

In most cases, foreign investors can acquire stakes in German companies without restriction. The Federal Ministry for Economic Affairs and Energy (BMWi) may however review and, where necessary, prohibit acquisitions of German domestic companies. 

Greenfield investments, where a new company is established, are not affected by the review. The scope of the review procedure is limited to acquisitions of domestic companies as well as substituting transactions  - such as asset deals involving all significant assets of domestic companies.

The subject of the cross-sectoral investment review is whether the acquisition is likely to affect the security or public order of Germany, another member state of the EU or specific projects/programs of EU interest. Any acquisition of 25 percent or more of the voting rights of a company located in Germany by investors based outside the EU or the EFTA region can be subject to such review. 

  • If the domestic target company in particular operates critical infrastructure or provides other specific security-relevant services related to the operation of such infrastructure, BMWi can review acquisitions of 10 percent or more of the voting rights. 
  • For acquisitions of domestic companies operating within the field of specific emerging technologies - for example semiconductors, AI, 3D printing or quantum technologies -  a review threshold of 20 percent or more of the voting rights applies.

Investments falling under one of the two above-mentioned groups with a review threshold of 10 or 20 percent of the voting rights must be reported to the BMWi.

Under the sector-specific investment review, special rules apply to the acquisition of domestic companies that operate in sensitive security areas (e.g. manufacturers and developers of weapons and other military key technologies). Under these rules, the BMWi can review whether an acquisition of 10 percent or more of the voting rights of a domestic company by any foreign buyer poses a threat to German essential security interests. These acquisitions are also subject to a notification obligation.

For further information on investment reviews in Germany please refer to the Federal Ministry for Economic Affairs and Energy

How can GTAI help?

The main function of GTAI is advising foreign investors on setting up their business in Germany. GTAI does not have the mandate to advise investors on the acquisition of stakes in German companies.

However, enquiries on merger and acquisition projects can be directed to GTAI’s partners and other specific service providers in this area.

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