European FDI, energy transition and tech M&A in Europe’s cross‑border investment landscape

European FDI is undergoing a profound transformation. While overall Europe FDI levels have declined due to high energy prices, slower economic growth and geopolitical instability, investor appetite remains strong in strategic, future‑shaping sectors such as AI infrastructure, semiconductors, renewable energy and advanced manufacturing. 

At the same time, crossborder investment flows have become more selective and more strategically aligned as governments tighten national screening regimes of sensitive technologies and services. 

European FDI rebounded sharply in 2025, reflecting a broader surge in flows to developed economies. According to UN Trade & Development (UNCTAD), the European Union recorded a 56% increase in FDI, supported by significant cross‑border acquisitions and renewed investment momentum in key economies including Germany, France and Italy.  

However, Europe’s resurgence reflects a selective recovery, driven by large, strategically aligned transactions rather than broad‑based expansion. While top markets have regained momentum, the wider investment environment across the region continues to be shaped by geopolitical uncertainty, supply‑chain realignment and heightened sensitivity in national‑security‑related sectors. 

The EU’s fifth annual FDI screening report confirms rapid expansion and increased use of national screening mechanisms. By 2025, almost every Member State had implemented an FDI regime, with France and others broadening the scope to cover critical technologies, including those powering the renewable‑energy transition.  

This tightening directly impacts cross‑border investment, especially in sectors tied to national resilience such as defence, energy infrastructure, telecommunications, AI and critical minerals. 

The energy transition continues to drive some of the most significant cross‑border M&A activity in Europe. Despite macroeconomic challenges, investors deployed €3.5 billion in European battery storage and grid‑modernisation assets in the first half of 2025 alone. 

European FDI is increasingly intertwined with energy resilience, decarbonisation and digital‑infrastructure demand This is particularly true as AI‑driven data centres reshape power‑consumption patterns across the continent.  

Law firm partner, Italy

ech‑driven dealmaking continues to be a pillar of cross‑border investment in Europe. Investors show strong preference for businesses with recurring revenue models, digital integration and scalable cross‑border platforms – trends that helped sustain M&A activity through 2025. 

FDI and national‑security scrutiny, like the “Golden Power” in Italy, now routinely affects acquisitions in AI hardware, semiconductors, EV technologies, cloud infrastructure and cybersecurity. According to international practitioners, cross‑border deals are taking longer, require more sophisticated structuring and face more regulatory conditions due to this enhanced scrutiny. 

This aligns with broader 2026 expectations: megatrends around critical minerals, energy transition, digital infrastructure and geopolitical realignment are reshaping the entire cross‑border investment environment, particularly in light of US tariffs. However, there are significant unanswered questions about how current geopolitical instability will affect foreign direct investment this year and next. 

Head of Antitrust, Italian law firm

European FDI has become a far more complex and regulated environment, and this shift is redefining what it takes for law firms to lead in the space. The firms best positioned for success are no longer those with isolated pockets of expertise, but those capable of building a genuinely cross‑disciplinary offering. Public law capability now sits alongside competition and M&A work as a core part of the FDI toolkit, reflecting the reality that many transactions are scrutinised not only for their economic effects but also for their national security implications.  

Competition Lawyer, Italy

Deep sector knowledge in areas such as the energy transition, defence, artificial intelligence and advanced manufacturing, has become indispensable as governments expand the categories of assets subject to review. 

The growing complexity of cross‑border investment means transactional execution skills are rising in importance. Clients increasingly expect advisers who can navigate multi‑jurisdictional screening processes with speed, fluency and strategic foresight. Notably, the latest Chambers research shows that many firms continue to rely on a single FDI specialist. This concentration of expertise may have been adequate a decade ago, but in today’s landscape it exposes a structural gap – and an opportunity.  

Firms that broaden and deepen their FDI bench strength are well placed to distinguish themselves as cross‑border reviews become more procedurally demanding and compliance‑heavy. 

For individual partners, staying competitive in the European FDI arena now requires specialisation, sophistication and strategic foresight. Those who are thriving tend to be cultivating genuine sector depth in the areas most exposed to regulatory intervention: defence, critical infrastructure and energy transition. This depth enables them not only to anticipate regulatory concerns but also to guide clients through the political sensitivities that increasingly shape outcomes. 

Equally important is mastery of cross‑border execution. As screening regimes mature and expand, the ability to coordinate filings, manage sequencing and anticipate jurisdiction‑specific pitfalls has become a defining differentiator. Partners with strong international client portfolios are finding themselves at the forefront of the market’s most consequential matters. 

A final marker of future‑readiness is the growing use of advanced analytics and AI‑enabled modelling to support scenario planning. With regulatory risk rising, clients are placing greater value on advisers who can quantify exposure, simulate regulatory pathways and support more rigorous decision‑making. This analytical capability is increasingly central to high‑quality M&A execution. 

The intersection of European FDI, energy transition and tech‑driven M&A is reshaping the future of cross‑border investment across the continent. As governments deepen FDI screening, investors pivot to strategic industries, and megatrends disrupt supply chains and energy systems, Europe is entering a new era that is defined by strategic alignment rather than volume. Clients require sharper advisory capability to navigate regulatory-driven complexity. 

For law firms, this is not simply a shift in market demand this is a significant opportunity to lead in an environment where European FDI, energy transition and technological transformation converge. 

Chambers’ rankings can help you find excellent local law firms and individual lawyers specialising in Italy’s Golden power and FDI issues.   

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