Earlier this month, the Council of the EU adopted a new framework for screening foreign direct investments. The press release notes that these rules replace the existing FDI screening framework that’s been in place since 2020. It explains:
The revised regulation requires all member states to establish screening mechanisms covering a common minimum scope of sensitive sectors, technologies and infrastructure (such as dual-use items and military equipment, critical raw materials, artificial intelligence, energy, transport and digital infrastructure), including foreign investments made through EU-based subsidiaries, while maintaining sole national responsibility for screening decisions.
The regulation also improves cooperation between member states and the European Commission, increases transparency and consistency across national screening systems, and streamlines procedures for investors and public authorities. In addition, it introduces new tools to facilitate information exchange and prevent circumvention of the rules.
The regulation will be published in the official journal and enter into force 20 days after publication. The new rules will start applying 18 months after the entry into force of the regulation.
This Gibson Dunn alert shares some color on what this means for U.S. investors in Europe:
The reform lands amid a changing stance vis-à-vis U.S. investors and mounting European sensitivity around foreign influence over the digital infrastructure underpinning core governmental functions. A case in point: On May 25, 2026, the Dutch government prohibited U.S.-based Kyndryl’s acquisition of Solvinity, the cloud provider hosting the Netherlands’ digital identity platform for accessing government services – the Netherlands’ first FDI prohibition of a U.S. acquirer. The message is unambiguous: U.S. investments in Europe enjoy no safe harbor, and that message is now being reinforced in the new EU FDI Screening Regulation.
One theme that runs throughout the reform: The new Regulation provides a floor, not a ceiling – it harmonizes a minimum standard but allows Member States to go further. Therefore, significant divergence between national FDI regimes in Europe is expected to persist.
The alert describes the “good,” the “bad,” and the “not-so-pretty” aspects of the new framework, which it characterizes as a “mixed bag” for investors who value predictability. It also says:
As most of the new regime hinges on national implementation over the next 18 months, the practical contours, including the application of risk factors and the call-in power, will emerge only after this. Investors active in the covered sectors in the EU should map their filing footprint and closely monitor national implementation over the coming months.
Back in March, we shared that the Premerger Notification Office was accepting the old HSR Form again — after a US District Court vacated the new rules and the FTC’s motion for a stay pending appeal was denied by the Fifth Circuit. This Baker Botts alert shares that, in May, the FTC and DOJ filed an unopposed motion to hold the appeal challenging the new rules in abeyance through the end of the year. In support of their motion, the FTC and DOJ cited their request for public comment and noted that they are evaluating potential changes to HSR requirements in light of the comment file with the goal of publishing a notice of proposed rulemaking by year’s end. They also indicated that the Agencies would continue to accept HSR filings using the old form.
The alert highlights these practical implications for parties making HSR filings:
Pre-February 2025 HSR rules remain in effect. Filers should continue using the less burdensome pre-February 2025 form and associated documentary requirements unless further changes are implemented.
The Agencies are pursuing continued consideration of revisions rather than abandonment of reform. The motion indicates that the Agencies are continuing to evaluate potential revisions to the HSR reporting framework while the appeal remains pending.
Further rulemaking may occur. The Agencies continue to view the prior HSR framework as insufficient for modern merger review and are likely to pursue expanded disclosure requirements.
The Agencies are emphasizing reduced burdens on non-problematic transactions. Recent statements reflect an effort to balance more effective merger screening with reduced compliance burdens for transactions unlikely to raise competitive concerns.
Areas of continued regulatory focus include: nontraditional transaction structures (including acquihires, reverse acquihires, convertible securities, and certain non-exclusive intellectual property licensing arrangements); and the scope of investment and real estate exemptions.
The Agencies are also continuing to evaluate disclosure obligations relating to: sovereign wealth funds, CFIUS, and defense-sector disclosures; supplemental filing obligations for materially restructured transactions or late-stage remedies; and the use of AI tools in identifying and selecting documents for HSR submissions and in responding to Second Requests.
The CAQ’s SEC Regulations Committee meets periodically with the SEC Staff to discuss emerging financial reporting issues relating to SEC rules and regulations. Last month, on TheCorporateCounsel.net, Dave shared that the Regulations Committee had published highlights from its Spring 2026 meeting with the Staff. As Dave noted, these highlights always offer useful insights into the Staff’s thoughts on a wide range of financial reporting issues. The meeting addressed these two topics of interest to this audience (among others):
– Corporation Finance Interpretations 130.05 and filer status determination upon consummation of a de-SPAC transaction; and
– Filing interim financial information for private operating company when a reverse merger between two operating companies occurs after fiscal quarter end, but before Form 10-Q is due.
There was a fair amount of optimism about the prospects for Private Equity dealmaking heading into 2026, but according to Bain & Company’s “Private Equity Midyear Report,” so far the year hasn’t lived up to expectations . Here are some of the highlights:
– Coming into 2026, the buyout market had largely shaken off tariff concerns, and dealmaking was on the rise. But then three more shocks arrived in rapid succession: the AI-driven “SaaSpocalypse” in software, redemption stress in private credit, and the war in Iran with its attendant spike in oil prices.
– The reduction in dealmaking has been sharp and wide-ranging Amid the new bout of uncertainty, bid-ask spreads have widened, investment committees have pulled back, and exit momentum has stalled out. Select transactions continue to clear—and at high prices—but mostly those involving A-plus assets.
– Given the growing pressure to buy and sell companies, it wouldn’t take much to unlock a wave of new dealmaking in the year’s second half. But a truly sustained upturn in activity will likely depend on the market finding an equilibrium that lasts more than a quarter or two.
– Private equity has entered a much more difficult and competitive era—one defined by higher interest rates, stubbornly high asset prices, and less of the multiple expansion that powered so many deals in the past. Generating consistent outperformance in the years ahead is going to require ever sharper strategic clarity and the value-creation system to back it up. It will also mean accelerating distributions to limited partners (LPs) by taking practical steps to boost exit momentum.
– Exit activity in the first quarter had yet to hit its stride. Despite year-end optimism, the industry has made little progress toward easing the liquidity crunch that has slowed down the capital cycle for years now.
– As long as exits drag, fund-raising will, too. Although there were several headline-grabbing fund closings in early 2026, like KKR’s North America Fund XIV and Bain Capital’s Asia Fund VI, overall momentum remains uninspiring.
The report says that in this challenging environment, the sponsors that will come out ahead are those that emphasize operational improvement and prioritize the “winners” among their portfolio companies, exploit opportunities for AI-driven value creation, and focus on disciplined execution.
Earlier this month, President Trump signed an executive order focused on promoting AI development while also strengthening cybersecurity and national security protections for frontier AI models. This excerpt from a recent Thompson Hine memo highlights the issues raised by the executive order for M&A transactions:
For private equity sponsors and M&A buyers, the order has immediate and practical implications. Transactions involving AI developers, software companies, data-intensive platforms, cybersecurity providers, critical infrastructure vendors, and any business that relies on advanced AI models should now expect more focused diligence on model governance, data architecture, security controls, and regulatory exposure.
Buyers should assess whether a target’s models could meet future “covered frontier model” thresholds, based on factors such as compute capacity, deployment scale, integration with federal or critical infrastructure systems, and intended use cases. Even if a model does not currently qualify, the order sets in motion a classified benchmarking process that may reclassify systems as they evolve. This means diligence must account for both current and potential future regulatory categorization.
Data architecture and model training practices are now central to AI-related risk. Buyers should evaluate data provenance, licensing, and chain-of-custody for training data; whether data is properly segmented between customers, models, and internal use; and whether models are trained on public, proprietary, or third-party data with restrictive terms. These issues directly expose sellers and buyers to IP, trade secret, and unfair competition claims, and they are likely to be scrutinized in both regulatory and commercial diligence.
The memo says that the order’s emphasis on an AI cybersecurity clearinghouse and federal vulnerability scanning suggests heightened expectations regarding the target’s cybersecurity program, and buyer’s need to ask whether that program would satisfy diligence expectations from the government, government contractors, and regulated industries.
It also notes that, due to the order’s focus on unlawful AI data access, buyers need to closely examine agent design and permissions, identity and access management controls, and safeguards against automation that could cross into “unauthorized access” under criminal statues.
If you’re interested in the use of AI for proxy voting recommendations in contested elections, check out Meredith’s recent podcast with Kekst CNC’s Co-CEO Lyndsey Estin and the co-leader of the firm’s Investor Relations and Contested Situations Practice, Nick Capuano. Lyndsey and Nick joined Meredith to discuss Kekst’s recent analysis of how voting recommendations from LLMs compare to those from the major proxy advisory firms across nearly 50 proxy contests. Topics covered in this 24-minute podcast include:
– How Kekst Conducted their Study
– The Headline: LLM Recommendations Lean toward Activists
– Beyond the Headline: Digging into the Data
– How LLM Recommendations Differed from Each Other
– The Sources and Rationales that Most Persuaded the LLMs
– The Sources and Rationales that Held Less Sway with the LLMs
– What this Means for Company Communications in Proxy Contests
We’ve been cranking out podcasts lately and we have several more in the hopper that we expect to post during the next month. If you’re interested in sharing your insights on a topic that you think would likely be of interest to members of DealLawyers.com or our other sites, we’d love to hear from you. You can contact me at john@thecorporatecounsel.net or Meredith at mervine@ccrcorp.com.
This WTW article notes that during the first quarter of 2026, 12 deals valued in excess of $10 billion closed, representing the highest quarterly number of “mega deals” WTW’s tracked since 2008. Furthermore, the first quarter saw 215 transactions above $100 million completed worldwide. That’s a 32% volume increase and represents the fourth consecutive quarterly rise in deals this size. WTW contends that these aren’t isolated data points, but indicators that the market has recalibrated, and identifies two factors driving the shift toward larger deals:
What is driving this resurgence? Our analysis reveals two converging forces reshaping the M&A landscape:
Balance sheet confidence returns. Corporate balance sheets have reached unprecedented strength levels. Organizations aren’t just spending money on new products, they are investing in new companies that will help them grow in the next ten years. The mega deals we’re tracking aren’t opportunistic; they’re deliberate moves by leadership teams with conviction about their strategic direction.
Operational scale as competitive advantage. In an environment where efficiency and scale increasingly determine market leadership, transformational deals offer a path to consolidate market positions and achieve the operational leverage that drives sustainable advantage. The mega deals closing today reflect a calculated bet that size and capability, when combined strategically, create defensible competitive moats.
WTW says that the most encouraging sign for dealmakers about the Q1 experience is that companies completing M&A transactions outperformed the market by 2.5% during the quarter. That’s a dramatic reversal from Q4 of 2025, where they underperformed the market by13.9%, and WTW believes that it demonstrates that markets are rewarding well-executed strategic deals.
In CIBC v. Barker, (Del. Ch.; 5/26), the Chancery Court dismissed a creditor’s derivative breach of fiduciary duty claims against the board of a distressed company. Those claims were premised on allegations that the board acted in bad faith in rejecting viable acquisition proposals in pursuit of a deal that would provide sufficient funds to satisfy the liquidation preference of its preferred stock and benefit the company’s other equity holders, and that the board failed to appropriately oversee the CEO’s role in the sale process.
According to the complaint, BERA, a distressed SaaS company controlled by a board that included significant stockholders and representatives of its preferred stockholder, PeakEquity, engaged in extensive efforts to pursue a sale transaction, the process was undermined by internal conflicts, particularly the CEO’s insistence on a valuation high enough to benefit equity holders and his alleged interference with potential buyers.
Ultimately, the company became insolvent and the board could not agree over lower-value offers that would not satisfy the preferred liquidation preference. It’s lender, CIBC, therefore moved forward with an Article 9 foreclosure sale. While the company owned CIBC more than $7 million, it realized only $650,000 in that transaction, allegedly due to the collapse of higher bids as a result of the CEO’s conduct.
In rejecting the plaintiff’s bad faith claims, Vice Chancellor Will concluded that stripped of its conclusory allegations, the complaint failed to satisfy the high bar for bad faith claims. CIBC argued that it was unreasonable for the board to pursue a deal that would satisfy PeakEquity’s liquidation preference and leave something for other equity holders. The Vice Chancellor disagreed:
Delaware law does not require directors of an insolvent corporation to abandon efforts to maximize enterprise value simply because creditors stand to capture any incremental recovery. Even accepting that the Board wished to clear Peak’s liquidation preference to generate a return for junior stockholders, that goal aligns with maximizing BERA’s value. That BERA failed to close a going concern sale and ultimately liquidated does not mean that the directors acted in bad faith when evaluating earlier proposals.
Vice Chancellor Will also rejected the oversight allegations – which were not framed as Caremark claims – observing that the complaint engaged in “group pleading” to impute bad faith to the directors from the CEO’s alleged misconduct. Instead of any specific allegations that the directors knew and failed to respond to the CEO’s actions, the complaint simply speculated that “the directors must have known about [the CEO’s] actions based on their “attendance at Board meetings and participation in the management of the Company.” She also found other conduct pointed to by CIBC as indicating failures of oversight by the directors as insufficient to withstand the motion to dismiss.
Ultimately, the Vice Chancellor concluded that the plaintiff was unable to demonstrate either a material benefit on the part of the director defendants or a substantial likelihood of liability for an unexculpated claim. Since both of these factors were required to demonstrate demand futility under Zuckerberg, Vice Chancellor Will dismissed CIBC’s derivative claims.
While the fiduciary duty claims against the company’s directors were dismissed, the CEO wasn’t as fortunate, and the Court allowed CIBC to proceed with tortious interference claims against him.
A recent CLS Blue Sky blog from Mayer Brown’s Jonathan Dhanawade reviews the state of the private equity exit market. As this title suggests, the theme is that the market “has improved, but it has not reverted to the conditions many sponsors once viewed as normal.”
Several sponsor-backed issuers accessed the public markets during the first quarter of 2026, while large sponsor-to-sponsor transactions also returned for scaled, high-quality assets. While market sources and data points vary, they generally report a decline in U.S. private equity exit deal value, but an increase in U.S. private equity deal volume in the first quarter of 2026 as compared to the first quarter of 2025. There isn’t enough data yet on Q2.
Strategic acquirers continue to pursue transactions that fit defined priorities. Capital is available, but disciplined. Public market demand has returned, but selectively.
Sponsors are responding by planning further ahead:
In prior cycles, liquidity planning was often concentrated near the end of the hold period. Today, many sophisticated firms are treating liquidity as an ongoing ownership function, developed well before a formal sale process begins [. . .]
Many firms are pursuing exits only after key initiatives are complete and the business can be presented with conviction. Others are extending holds where another year of focused execution may materially improve value. Some are pursuing structured liquidity solutions that provide distributions now while preserving future upside.
Here’s what the blog says effective sponsors are doing specifically. See the blog for more details on each.
1. They Underwrite the Exit While Owning the Asset. “Some sponsors [. . .] revisit the eventual buyer universe, likely diligence focus areas, and valuation drivers throughout the hold period.”
2. They Distinguish Motion From Progress. “Sophisticated sponsors focus on changes that are likely to matter in a sale process: revenue durability, margin quality, management depth, systems credibility, market position, and scalability.”
3. They Run Multiple Paths Without Signaling Uncertainty. “The strongest firms often evaluate multiple liquidity paths simultaneously. A traditional sale, structured recapitalization, or continued hold may each remain viable until late in the process.”
4. They Manage the LP Narrative With Specificity. “Sponsors who can explain why an asset is being sold now, held longer, or monetized through an alternative structure are often in a stronger position than those offering only broad market commentary.”
Last week, in Shore Community Energy LLC v. MassAmerican Development (Del. Ch.; 5/26), the Chancery Court addressed claims for damages following a purchaser’s failure to pay the purchase price under multiple membership interest purchase agreements and found them to be time-barred under the terms of the agreements. The facts are as follows:
Shore Community established four companies to develop solar panel farms, then entered into four MIPAs with MassAmerican, under which Shore Community agreed to sell its interests in the companies. Though the transactions closed on December 12, MassAmerican had two months thereafter to make the payments, which it failed to do. Each of the MIPAs provided that Shore Community could repurchase all the membership interests for $1.00 if MassAmerican failed to “make any required payment.” Seven months later, Shore Community filed suit and won a default judgment directing MassAmerican to transfer the interests back to Shore Community. Shore Community then filed a motion, now requesting damages for breach of the MIPAs.
But the MIPAs provided that indemnification was the exclusive remedy for any failure to perform any agreement. Plus, indemnification claims had a six-month survival period, and an indemnification notice had to be provided before the survival period expired. Vice Chancellor David said:
Closing occurred on December 12, 2024, meaning the survival period for an indemnity claim expired on June 12, 2025. The alleged breaches occurred between December 12, 2024, and March 15, 2025, within the survival period, but Plaintiff waited to file the Complaint until seven months later, on October 10, 2025. As a result, Plaintiff’s request for contract damages is time-barred under the MIPAs.
She said that plaintiffs tried to avoid this result by arguing for a reading of the MIPAs that (1) indemnity was only the exclusive remedy for that six-month period, at which point other remedies became available, and (2) the indemnity clause does not apply because its request for contract damages is really a demand for “specific performance” of MassAmerican’s contractual obligation to pay certain costs. She found that:
This argument is inconsistent with the plain language of the MIPAs, which limits Plaintiff’s monetary remedy to indemnity and requires that such remedy be sought within the six-month survival period [. . .]
Under Delaware law, the equitable remedy of specific performance does not encompass an order to pay money; instead,“[t]he purpose of specific performance is to address ‘situations where the assessment of money damages is impracticable or somehow fails to do justice.’” [. . .] The Court has already ordered specific performance by requiring MassAmerican to return the membership interests to Plaintiff. Plaintiff now seeks “Default Judgment as to Damages.” As set forth above, the MIPA forecloses this request.