The regulatory landscape for life sciences M&A deals has shifted decisively as enforcers around the world act to scrutinize such transactions under their respective merger control and foreign direct investment (FDI) regimes. Beyond that, the Foreign Subsidies Regulation (FSR) has emerged as a significant additional regulatory consideration. Early-stage regulatory risk assessments, cross-border strategic alignment and careful consideration of filing strategy are paramount to deal success.

Merger control

• Below threshold transactions. In the EU, the Commission has lost significant power to review transactions not meeting notification thresholds following the ECJ's 2024 ruling in Illumina/Grail. National authorities are therefore actively seeking alternative mechanisms to review such transactions. In the UK, the CMA has introduced a "hybrid" jurisdictional test, capturing acquisitions with low or no UK target turnover. In the U.S., the antitrust agencies can and do investigate transactions that do not meet the Hart-Scott-Rodino filing thresholds. This is of particular relevance to life sciences transactions involving pre-revenue targets and/or potentially substitutable drug R&D projects.
• Contractual arrangements. While the vast majority of merger control regimes apply only to structural acquisitions, in some circumstances, non-structural arrangements (e.g., certain licensing agreements or contractual global R&D collaborations) may also be notifiable in certain jurisdictions. Companies entering into option agreements (including in the context of R&D collaborations) should also consider potential future filings ahead of signing.

Foreign Direct Investment

• Focus on health care. While some FDI regimes are target-activity agnostic, most apply only to acquisitions in sectors deemed critical to national security or stability. Pharmaceutical manufacturing and health care-adjacent activities are prevalent among these lists, with key examples including Italy, Germany, Spain, and France.
• Intra-group transactions. Unlike merger control regimes, a surprisingly large number of FDI or national security regimes do not automatically exempt intra-group reorganizations or transactions not resulting in a lasting change of control. Examples include the UK, Italy, and the U.S.
• Asset acquisitions. Since the majority of major FDI regimes can in principle capture foreign investment in standalone assets, the scope of any FDI analysis should include the location of target assets as well as jurisdictions in which the target company has subsidiaries.

Foreign Subsidies Regulation

As frequent recipients of R&D grants, tax incentives, and government funding outside the EU, life sciences companies are prime candidates for the FSR regime, imposing a duty to report global financial contributions (a broader concept than subsidies) received over three years prior to a transaction in the case of a notification.