Rethinking European Defence: Executing Transactions Amidst Regulatory Complexity

Whilst ESG compatibility and fund structuring create the foundation for defence investment, as we explored in part 2, successful execution requires mastering the complex and evolving regulatory frameworks and transaction dynamics that define this sector. Investors must navigate multiple overlapping jurisdictions whilst managing security requirements that do not affect traditional private equity.

Understanding the regulatory architecture

Defence transactions operate within a regulatory framework designed primarily for national security rather than commercial efficiency. This fundamental tension shapes every aspect of deal execution, from initial due diligence through post-completion integration. Governments maintain extensive oversight powers that have expanded significantly since Russia's invasion of Ukraine, reflecting heightened security awareness across Western Europe.¹