How American capital pursuing Belgian investment or acquisition targets can mitigate deal‑breaker risks

US investors have become some of the largest participants in European deals in recent years. In many late‑stage European funding rounds (Series C and beyond), US funds are now either leading or strongly represented. Even with the recent downturn, US appetite for high‑quality European assets has remained strong.

Belgium hosts world-class clusters in life sciences and healthcare, chemicals, materials and advanced manufacturing, and technology and artificial intelligence with valuations that compare attractively to American assets. For US investors seeking access to cutting‑edge European innovation, Belgian companies offer an additional structural advantage: their location at the heart of the EU and proximity to key EU institutions in Brussels. This can give Belgian companies early insight into and, in some cases, influence over the regulatory framework and standards that shape the entire single market.

For a US fund investing into or acquiring a Belgian company, three recurring “deal breaker” themes tend to cause transactions to collapse: regulatory and approvals risk, legal and structural issues revealed in due diligence that undermine value or enforceability, and misalignment with founders and management and existing shareholders.

Regulatory and approvals risk 

If the fund cannot get required regulatory clearances on acceptable terms and timelines – or discovers they are needed too late –  the deal can become unworkable or too uncertain for investment committees. The principal Belgian and EU angles to watch includes foreign direct investment (FDI) screening and merger control  and competition filings

FDI screening

Belgium has implemented FDI screening rules applicable to non‑EU investors operating in a range of strategic sectors, including energy, defence, dual-use items, certain technology and data-heavy businesses, and healthcare.

A US fund is a non‑EU investor and can be caught even if investing through EU holding structures, depending on control and ownership. The main risk points are threefold. First, mandatory notification and approval requirements can, if not factored into the timetable from the outset, cause significant delays to closing. Second, authorities may impose conditions – such as restrictions on governance and information right – that prove unacceptable to the fund. Third, In extreme cases, a transaction can be prohibited or ordered to be unwound.

The European Commission, in its joint communication with the High Representative for Foreign Affairs and Security Policy published on 3 December 2025, announced that it would develop FDI guidelines to drive uniform screening approaches across national authorities, including how to address cumulative risk from multiple investments. The Commission also indicated that it would clarify the relationship between EU‑level requirements and national financial sector screening mechanisms.

Merger control and competition filings

Where a deal crosses Belgian or EU merger control thresholds, clearance will be required before closing. The main risk points here include underestimating the competition risk in a concentrated market, discovering late that a filing is needed – causing timing slippage and potential "gun jumping" concerns – and receiving clearances only subject to remedies such as divestments or behavioural commitments that cut across the investment thesis.

How to mitigate these risks?

The most effective approach is to conduct early and thorough regulatory mapping across FDI rules, merger control thresholds, sector-specific regulators and employee consultation requirements.

Alongside this, the deal timetable should incorporate a realistic long-stop date with clear risk allocation – that is, who bears the risk if approvals are refused or conditioned. Funds should also prepare clean, transparent explanations of their ownership and fund-structure explanations for regulators.

Legal and structural issues revealed in due diligence 

US funds generally need a clean, bankable structure with identifiable cash flows and enforceable rights. Belgian law issues uncovered in due diligence can drastically change the risk-return profile or render execution unnecessarily complex. There are common pitfalls that can arise in due diligence and legal and structural issues that can undermine value or enforceability.

Corporate and governance flaws

Non‑compliance with the Belgian Code on Companies and Associations – such as issues with share issuances, shareholder approvals and conflicts of interest that not been properly documented – can create significant legal exposure.

Multiple share classes may not align with the fund’s preferred governance model, including its board control, vetoes and information rights. Existing shareholder agreements are another potential source of difficulty: they may contain strong veto rights, blocking minority protections or rights of first refusal that obstruct the transaction, or they may lack of the drag-along provisions to deliver a clean exit.

Tax structuring and leakage

Dividend-withholding tax, interest deductibility limits, anti‑abuse rules and the new Belgian rules on taxation on capital gains can all make the post-tax returns materially worse than expected. Hybrid instruments, or shareholder loans may trigger unexpected tax or regulatory consequences under Belgian or EU rules.

Historic tax exposures – including transfer pricing, VAT and the social security reclassification of independent contractors as employees –  may be larger than the fund is willing to take on, particularly if they cannot be fully covered by escrow arrangements or indemnities.

Key contracts and IP 

Problems can also arise when contracts and intellectual property are not properly locked down. Change-of-control clauses can give customers or suppliers the right to terminate or renegotiate on a sale, placing core commercial relationships at risk. Intellectual property created by founders or contractors that has not been properly assigned to the company threatens the ownership of what may be the central asset of the business.

Material non-compliance with data protection and the General Data Protection Regulation or sector-specific regulations can also lead to heavy fines or remedial costs.

How to mitigate these risks?

Robust Belgian-law due diligence with early "red‑flag" reporting focused squarely on deal-breakers is essential. Flexible structuring – including a financing mix that respects corporate benefit rules and tax-optimised holding structure – can resolve many of the issues identified. Where problems cannot be restructured away, pragmatic solutions such as targeted indemnities, escrow arrangements, pre-closing restructurings or the carve-outs of problematic assets and liabilities should be considered.

Misalignment with founders, management and existing shareholders

Even if the legal and regulatory aspects are solvable, many deals break because the US fund and Belgian stakeholders cannot reach alignment on control, economics or post‑closing roles.

Valuation and structure of consideration

Gaps in valuation expectations are common, especially in high-growth sectors. Belgian founders often prefer upfront cash, whereas US funds may push for earn-outs, roll‑over equity, or ratchet mechanisms. Disagreements over dilution mechanics – including the size of the management incentive pool size and anti‑dilution protections for the fund – can also prove difficult to resolve.

Governance and culture

US funds typically seek a strong control package: majority board representation, veto rights over budgets, and the ability to hire and fire key executives. Founders, by contrast, may want to retain operational and strategic autonomy and can be uncomfortable with what they perceive as heavy US-style governance and reporting obligations. This culture gap is often underestimated at the outset of a process.

Exit expectations

Funds require a clear exit path and timeline, whether through a trade sale, secondary buyout or initial public offerering (IPO). Founders may have longer horizons or be reluctant to commit to a sale at the fund’s preferred schedule. Failure to align on drag-along and tag-along rights, the merits of an IPO versus a trade sale, and minimum return thresholds or waterfall allocations can each become deal-breakers.

Documentation style 

US-style documentation – characterised by extensive representations and warranties, broad indemnities and provisions shaped by US litigation practices – can sit uneasily with Belgian and continental market norms. Where founders or sellers find the terms overly aggressive or unfamiliar, trust can erode quickly and negotiations break down.

How to mitigate these risks?

Early-stage discussions – and ideally a detailed term sheet or letter of intent – should address governance, management incentives and exit mechanisms not just the headline price. Advisers familiar with both US investor expectations and Belgian and EU rules are invaluable in to bridging these documentation and cultural gaps – and should be used to assist in discussions.

In M&A transaction, warranty and indemnity insurance should be considered as a means of softening seller liability while providing the fund with the comfort it requires.

Osborne Clarke comment

US funds can unlock strong value in Belgian deals by anticipating regulatory hurdles early, structuring carefully under Belgian law and tax rules, and addressing governance and exit terms upfront. With the right preparation and advisers in place, the main deal-breakers can become manageable risks rather than obstacles that prevent the transaction from going ahead.