GERMANY Law and Practice Contributed by: Georg Linde and Kamyar Abrar, Willkie Farr & Gallagher LLP
2. Private Equity Developments 2.1 Impact of Legal Developments on Funds and Transactions Foreign Direct Investment Reform and Envisaged Investment Screening Act Germany’s Foreign Direct Investment (FDI) reforms in 2020 and 2021 have significantly impacted private equity transactions and continue to do so, particularly in sectors critical to national security, such as informa - tion and communication technology, healthcare, bio - technology, energy, and high-tech industries like aero - space and semiconductors. Both the German Federal Ministry for Economic Affairs and Energy ( Bundesmin- isterium für Wirtschaft und Energie – BMWE ) and the European Commission are working toward further tightening and harmonisation of these rules. In April 2025, the European Parliament adopted a revised EU FDI Screening Regulation, mandating coordinated screening practices across Member States and expanding the scope to include greenfield investments, advanced technologies (eg, AI, quantum, semiconductors), and critical infrastructure. The regu - lation also strengthens the European Commission’s ability to intervene in or block transactions that pose systemic risks to the EU’s strategic autonomy. To that end, the German government is planning an amended Foreign Trade and Payments Act ( Außen- wirtschaftsgesetz ), which is expected to consolidate existing FDI screening rules and formalise review pro - cesses. A draft bill is expected in the near future. Once in force, it may extend sectoral coverage and will refo - cus intervention thresholds. Regulatory clearance will therefore remain a key element of the M&A timeline. Modernisation of German Partnership Law (MoPeG) On 1 January 2024, the Act to Modernise the Law on Partnerships ( Personengesellschaftsrechtsmodern- isierungsgesetz or MoPeG ) came into effect, introduc - ing registration obligations for civil law partnerships ( Gesellschaften bürgerlichen Rechts , or GbRs ) at the new Partnership Register ( Gesellschaftsregister ), par - ticularly where they hold real estate or shares in limited liability companies ( GmbHs ).
This change may have practical implications in cases where GbRs appear in holding structures, family- owned entities, or acquisition targets. It may also affect legacy arrangements where real estate or share - holdings are held via GbRs. As a result, GPs, fund administrators and advisors should be aware of the new formalisation and compliance requirements, par - ticularly in the context of due diligence, transparency and legal structuring. EU Foreign Subsidies Regulation (FSR) The EU Foreign Subsidies Regulation (FSR), in force since mid-2023, adds scrutiny to private equity transactions involving foreign subsidies. For private equity investors, the FSR applies where a transaction qualifies as a “concentration” and where the relevant parties have received substantial non-EU state aid (defined by financial thresholds). As of 2025, the FSR has become a material consideration in cross-border deal planning. In June 2024, the European Commis - sion initiated its first in-depth investigation under the FSR – scrutinising the proposed acquisition of PPF Telecom Group by Emirates Telecommunications Group. The case signals growing regulatory activism and highlights the increasing compliance burden for foreign-backed acquirers. PE sponsors must now conduct early-stage FSR analyses to avoid delays or challenges. ESG, Sustainability and Supply Chain Compliance Environmental, social, and governance (ESG) regula - tion continues to reshape private equity strategy and transaction execution in Europe. The EU Corporate Sustainability Reporting Directive (CSRD) entered into force in early 2025, requiring large companies and in- scope portfolio firms to disclose detailed non-financial information, including climate-related risks, human rights compliance, and governance frameworks. In parallel, the Corporate Sustainability Due Diligence Directive (CSDDD), formally adopted in 2025, is intro - ducing mandatory human rights and environmental due diligence obligations across the value chain. This is further compounded by evolving national rules on supply chain transparency, labour standards, and co- determination rights, particularly in Germany.
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