Defining the Scope of “Critical”

A recurring challenge for market participants lies in defining what actually constitutes a “critical” activity. Defence is relatively clear-cut, but the scope of essential infrastructure now extends notably across energy, cyber, data, AI, raw materials, transport, and healthcare. European and national frameworks governing foreign investment screening (‘FDI’) have expanded in parallel, but the resulting patchwork of rules leaves room for uncertainty.

Even seemingly peripheral links — subcontracting relationships, supply chains, or minor product placements — can trigger FDI notification obligations in multiple jurisdictions. This extraterritorial reach makes early regulatory mapping essential, ensuring that companies understand the terrain before strategic decisions are made.

Information Barriers and the Art of Anticipation

In these sectors, access to information is deliberately constrained. Classified or restricted materials, trade secrets, and confidentiality obligations limit visibility during due diligence, often forcing investors to make judgments based on incomplete or fragmented data.

This reality calls for careful planning. Establishing controlled “clean team” structures, identifying where access restrictions apply, and embedding security protocols into the transaction process all reduce friction. The key is to anticipate bottlenecks rather than react to them — a discipline that often determines whether a deal proceeds smoothly or stalls.

Regulatory Complexity as a Strategic Variable

European and national FDI regimes differ in both scope and pace, and a transaction approved in one jurisdiction can easily be delayed or blocked in another. Some countries also assert regulatory reach over deals with only a limited territorial connection.

For companies and investors, regulatory complexity must be treated as a strategic factor — one that affects valuation, structure, and timing. Integrating approval procedures into the deal calendar and using contractual tools such as long stop dates or ticking fees can help manage uncertainty. Anticipation and alignment across teams — legal, financial, and operational — are crucial to avoiding last-minute disruptions.

Financing Resilience in Sensitive Sectors

Financing remains a major constraint in the defence and essential infrastructure space. Companies in these sectors often face higher debt levels and tighter margins than their civilian peers, while their strategic profile can deter conventional lenders.

Public support and specialised investment vehicles have become increasingly important. Governments and financial institutions have begun refining ESG frameworks and credit doctrines to better accommodate strategic industries. Initiatives such as the Defence Investors Club are helping to bring together capital providers and sector leaders to share best practices and align expectations.

For businesses, maintaining open dialogue with both regulators and financiers is key — not only to secure funding, but to demonstrate commitment to responsible growth and compliance with national interest priorities.

Tax and Structural Considerations

Tax planning remains central to maintaining financial flexibility. The interaction between public subsidies and the research tax credit (CIR) can significantly influence a company’s cash flow and R&D strategy. Likewise, public or institutional participation may alter a firm’s European SME status, potentially affecting eligibility for tax incentives or public aid.

Well-considered structuring — including the use of convertible instruments or hybrid funding models — can help balance innovation investment with fiscal prudence.

Anticipating these effects early ensures that operational goals remain aligned with regulatory and financial realities.

Cybersecurity as Governance

Cybersecurity has evolved from a technical safeguard into a cornerstone of governance. The NIS II Directive reinforces this transformation by expanding compliance obligations, imposing management-level accountability, and introducing penalties for non-compliance.

For boards and leadership teams, cybersecurity now represents not just a compliance risk but an existential one. Effective governance means embedding cyber risk into strategic decision-making and ensuring that training, documentation, and oversight are consistent and robust. In an era where digital infrastructure underpins national resilience, cybersecurity has become inseparable from corporate responsibility.

Looking Ahead: Sovereignty and Strategic Foresight

Emerging European initiatives, including the anticipated regulation on outbound investment, reflect a growing determination to protect strategic technologies and industrial sovereignty. By introducing potential notification requirements for the transfer of know-how beyond the EU, these measures mirror existing inbound investment controls — and point toward a more comprehensive approach to economic security.

Ultimately, companies operating in defence and critical infrastructure must embrace multidisciplinary, proactive collaboration. Regulatory understanding, fiscal foresight, and operational discipline must converge to support resilience and competitiveness. In this environment, preparedness is not a tactical advantage — it is a precondition for sustainable success.