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In the Know: Private Equity and Cross-Border Investment Challenges

08. Oktober 2025

Cross-border considerations are no longer peripheral issues in private equity transactions. Whether through sanctions, export controls, foreign direct investment regimes, or evolving US policy, these factors are now central to how deals are structured, valued, and closed. Recent policy shifts and enforcement trends underscore the need for sponsors, boards, and corporate decisionmakers to anticipate regulatory scrutiny early and build compliance into deal strategy from the start.

The following key takeaways, taken from a recent webinar in our In The Know: Private Equity series, highlight practical steps and emerging risks that deal stakeholders should keep front of mind when navigating today’s cross-border investment landscape.

  • Voluntary Self-Disclosures Can Be Value-Preserving Tools
    • Under the DOJ National Security Division’s voluntary self-disclosure and M&A policy, private equity acquirors that promptly self-disclose violations identified postacquisition, fully cooperate, and remediate appropriately may obtain a declination of prosecution.[1]
    • In a recent case, a private equity firm received a declination from DOJ and avoided criminal liability after voluntarily disclosing sanctions and export control violations committed by the company it acquired shortly after discovering the conduct, while the acquired company received a nonprosecution agreement. The respective declination and nonprosecution agreement were approved during the previous administration and carried out under the current administration, reflecting bipartisan consistency across administrations and providing a roadmap for mitigating successor liability.
  • The Strategic Tensions of the ‘Impossible Trinity’
    • In geopolitics, only two of the following three situations can simultaneously exist: economic interdependence, geopolitical competition, and economic security—i.e., the “Impossible Trinity” as described by former public official and author Edward Fishman. Current global dynamics show rising competition and declining security, leading countries to adopt unilateral defensive measures.
    • For investors, this means export controls, sanctions, and FDI rules will continue to expand, requiring quarterly or semiannual reassessments of risk exposure.
  • Export Controls and Sanctions Drive Deal Valuations
    • Buyers should identify restricted jurisdictions, denied parties, and controlled goods and adjust valuations or negotiate protections accordingly. On the other hand, sellers that can demonstrate robust compliance with Export Administration Regulations, International Traffic in Arms Regulations, Office of Foreign Assets Control, and similar regulatory regimes enhance credibility and improve prospects for securing representations and warranties insurance coverage.
    • Failure to address these risks can derail deals or create unforeseen compliance costs postclosing.
  • Board Oversight Obligations Are Expanding
    • Under Delaware and similar law, directors of portfolio companies have duties of oversight to implement compliance programs designed to detect and prevent violations and respond appropriately to red flags.
    • Regulators expect “constructive skepticism” by boards. Documenting that compliance questions are raised and meaningfully addressed is essential to mitigating exposure.
  • ‘America First’ Investment Policy Signals Incremental But Notable Shifts
    • The February 2025 policy memorandum reaffirmed the link between national and economic security. It emphasized restricting adversary access to US capital, technology, and farmland while encouraging allied investment.
    • Notable proposals include expanding CFIUS jurisdiction to “greenfield” investments, creating a fast-track process for low-risk deals from allied nations, and tightening outbound investment restrictions in sectors such as semiconductors, artificial intelligence, quantum, biotechnology, and hypersonics.
  • Subsidiaries and Indirect Activities Can Trigger FDI Reviews
    • Even limited operations, exclusive licenses, or sales contracts at the subsidiary level can create filing obligations in multiple jurisdictions.
    • Newer FDI regimes, such as those in Ireland, Belgium, Saudi Arabia, and Singapore, are broad and often vague, while experienced jurisdictions such as Australia, Canada, and Japan are tightening scrutiny.
    • Data access, critical raw materials, and biotech are among the areas regulators increasingly flag, beyond traditional defense or infrastructure sectors.
  • Outbound Investment Restrictions Will Likely Expand
    • The current rules focus on AI, quantum computing, and semiconductors but future regulations may extend to biotech, aerospace, hypersonics, and advanced manufacturing.
    • Even if the regulations broaden in scope, investors will be primarily concerned about whether the regulations retain their general exemptions for passive investment.

CONCLUSION

Private equity firms and corporate boards must treat cross-border regulatory issues as front-end strategic considerations rather than afterthoughts in diligence. Voluntary self-disclosures, proactive compliance integration, and thorough subsidiary-level reviews can mitigate risks and even create value.

Shifting US and international policies—from CFIUS expansion to outbound investment restrictions—signal continued scrutiny of how and where capital flows. For deal makers, anticipating these dynamics is no longer optional; it is a prerequisite for closing transactions and safeguarding long-term value.

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[1] From a practical perspective, even preacquisition disclosures—by the target company, in the target company’s name and with set-asides for penalties and related costs—can be a desirable outcome for the buyer or investor.