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Navigating National Security and Geopolitical Risks in M&A Transactions and Investments in Norway

Hedvig og Christian 1

In the ever-evolving landscape of business, national security and geopolitical risks have become pivotal considerations for private equity and other investors, businesses and advisors to stay ahead of the curve and ensure profitable M&A transactions and investments in Norway. While these risks were once the domain of sectors like law enforcement, the military, and the weapons industry, the narrative is now dramatically changed.

The changing landscape of national security risks

Recent global events such as the invasion of Ukraine, the Nordstream incident, and the international recognition of China as a national security threat have heightened the focus on these risks across a broad spectrum of sectors in Norway. The spotlight on regulations, government involvement, and public perception related to national security and geopolitics has underscored the importance of addressing these risks in M&A transactions and investments.

At Thommessen, we are at the forefront of this change. Christian Grüner Sagstad, Partner and head of our M&A and Equity Capital Markets team, and Hedvig Moe, Specialist Counsel and former deputy director at PST (the Norwegian equivalent of the MI5), collaborate closely on transactions, leveraging Hedvig's expertise in national security and geopolitical risks.

Rising trends in M&A and the importance of risk management

Christian notes a rising trend of M&A deals and investments potentially impacted by these risks, and an increasing number of clients acknowledging the stakes. Christian highlights that clients, including private equity firms and other buyers and investors, are intensifying their focus on risks stemming from stricter national security regulations. These regulations, encompassing foreign investment regulations (FDI), sanctions, and issues related to the Norwegian Security Act, can obstruct deal closings, inflict significant reputational damage, and complicate planned exits if potential investments are not thoroughly screened and risks managed effectively.

- More and more clients are seeking our assistance with screenings and analysis at the early stages of sourcing or assessing targets. This proactive approach ensures proper planning, avoids unnecessary costs, and prevents adverse consequences, Christian explains.

Understanding and navigating complex risks

Hedvig further emphasizes that geopolitical incidents can have a profound impact on businesses, illustrating with those reliant on specific components from China. An abrupt halt in exports could result in substantial losses in profit and reputation, underscoring the importance of comprehensive risk screening.

- Navigating national security and geopolitical risks is a complex endeavor that demands a deep understanding of the threat landscape, applicable regulations, transactions, and government involvement. At Thommessen, we pride ourselves on offering a unique blend of experience and knowledge, providing unrivaled advice to our clients, Hedvig continues.

In our ongoing commitment to enhancing our firm's analytical capabilities, we recently welcomed Elin Ibsen Gustavsen from PST to our team. Elin, who was a key resource in developing PST's national threat assessment to counterintelligence, is a significant asset to our team. Her expertise further strengthens our ability to contribute to identifying risks and commercial opportunities in M&A transactions and investments.

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