FRANCE Law and Practice Contributed by: Idris Hebbat, Camille Perrin, Franck Vacher and Nicolas Menard-Durand, C-Level Partners
Practical Implications for Private Equity Investors Transaction timing and structure The consolidation of foreign investment controls as permanent features of the French regulatory land - scape means that private equity investors must now systematically integrate these considerations into their transaction planning from the outset. The authorisa - tion process can add several months to transaction timelines, requiring earlier engagement with regulatory authorities. Enhanced legal due diligence The role of legal due diligence has become even more critical, with law firms now required to conduct com - prehensive assessments of foreign investor exposure throughout the entire ownership chain, not just at the direct investment level. Portfolio company considerations Private equity portfolio companies operating in sen - sitive sectors must now consider foreign investment implications not only for their own operations but also for any future strategic initiatives or expansion plans that might trigger additional regulatory review. 3. Regulatory Framework 3.1 Primary Regulators and Regulatory Issues Anti-Corruption and ESG Compliance The French Anti-Corruption Agency ( Agence Fran- çaise Anticorruption , or AFA) continues to regulate M&A transactions to fight corruption under the law of 9 December 2016. The agency maintains its annual guidance on good conduct, with no major legislative changes in 2024–25. Regarding ESG compliance, France continues to align with European developments. The role of audit com - mittees in monitoring ESG standards has become increasingly important, with many funds now special - ising in socially responsible investments as aware - ness of non-financial criteria continues to grow among French financial community players.
restrictive bank lending practices experienced in recent times. Fundraising remained tough – down 24% year over year for traditional commingled vehicles, marking the third consecutive year of decline. Investment returns were muted, especially compared with buoyant public markets. The French private equity market in 2025 shows a clear preference for defensive, growth-oriented sec - tors like technology and healthcare. While macro-eco - nomic conditions have improved with declining inter - est rates and inflation, the market continues to face challenges from valuation gaps and reduced fundrais - ing activity. The gradual economic recovery and stable geopolitical environment (absent new major shocks) provide a cautiously optimistic outlook for continued sector-focused investment activity. 2. Private Equity Developments 2.1 Impact of Legal Developments on Funds and Transactions Consolidation and Expansion of Foreign Investment Controls The expanded foreign investment control regime has significantly increased the complexity of due diligence processes for private equity transactions. Investment funds with any foreign investor in their chain of own - ership must now carefully assess whether their target investments fall within sensitive sectors requiring prior authorisation. The list of sensitive activities continues to expand, now covering an even broader range of sectors including critical raw materials processing and extraction, quan - tum technologies, and advanced biotechnologies. Enhanced Regulatory Scrutiny The antitrust and foreign investment regulations have been enhanced over the past few years and now apply to a larger scope of transactions, including private equity transactions. Further, recent French case law relating to the tax treatment of management packages may cause difficulties in private equity transactions.
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