Europe Protects Its Strategic Industries: Defense Deals Test Limits of American Investment

Series of upcoming acquisition deals are testing how willing Europe is to allow American investors to own European defense and technology companies, as governments seek to strengthen sovereignty over strategic sectors and reduce risks of losing control over vital industries.

The Dutch company Robyn Radar, specializing in drone detection systems, stands out as one of the next major tests, with sources telling the Financial Times that its owner, Barcom, is trying to avoid U.S. arms manufacturers submitting bids, fearing local government objections.

Barcom is working with an advisor to launch a sale process in the coming months, aiming for $2 billion or more for the company, with a preference for a European strategic investor or a European private equity firm to minimize political intervention risks.

This comes as Brussels and European governments intensify scrutiny of merger and acquisition deals, especially those involving strategic assets in defense, technology, and energy sectors.

According to several senior deal advisers, communication with governments and militaries now occurs at earlier stages than before, aiming to discuss sensitive issues related to defense assets on the market.

Owners and potential investors are also offering guarantees to preserve jobs and technology within Europe, to avoid lengthy foreign direct investment reviews or the risk of deal rejections.

In May, the Dutch government blocked a U.S. company, Kinderly, from acquiring Solviniti, a cloud computing specialist providing the Netherlands’ digital identity system and managing data linked to taxes, healthcare, and pensions for citizens.

This marked the first time since the Dutch Investment Screening Office was established in 2020 that it blocked a U.S. acquisition attempt.

Diana Dimitrova, head of aerospace and defense at UK-based PCG, said European governments’ messages have become clearer: building and retaining capabilities within Europe is essential, noting the issue extends beyond defense to jobs, supply chains, and control over Europe’s industrial base.

One deal expert said several emerging defense tech firms considering selling their operations have informed their advisers they would only sell to European investors, to avoid risking loss of major government contracts.

But this trend may come at a cost to sellers, as rejecting U.S. offers could lead to lower valuations. The expert noted some sellers want European capital at valuations comparable to those offered by U.S. buyers, though this is not always achievable.

These tests are not limited to Robyn Radar. A number of other European defense assets are either up for sale or under strategic review, and could face questions about allowing American ownership.

UK-listed private equity firm Bridgepoint is preparing to sell Denmark’s My Defence, a drone detection and jamming specialist, in a deal potentially worth around $1 billion.

Pole-based Advanced Protection Systems, specializing in counter-drone technology, is also undergoing a strategic review that includes the possibility of a sale, according to people familiar with the matter.

Advanced Protection Systems is a key component of Poland’s plan to build the largest anti-drone air defense system in Europe, following Russian violations of the airspace of a NATO member state.

The company was recently added to Poland’s list of strategic enterprises, granting the government authority to block any sale.

When asked about the possibility of selling the company, CEO Maciej Klim said Advanced Protection Systems is only evaluating different options for further growth and aims to become a leading European player in counter-drone technology.

The growing interest in these companies comes amid rising importance of drones and their countermeasures for militaries, manufacturers, and investors, as conflicts in Ukraine and the Middle East have propelled these technologies to the forefront of modern warfare.

Robyn Radar exemplifies the rapid transformation in this sector. Starting as a new generation of low-cost, short-range radar companies focused initially on detecting birds, the company shifted its focus to drones in 2014.

Since then, it has secured a range of customers across Europe and the United States, including supplying radar systems to Ukraine.

Robyn Radar has won multiple contracts with the Dutch government, including a request to deliver 100 Iris radars designed specifically for drone detection.

The company has also expanded its activities in the United States, opening a larger operations center in northern Virginia last month after sales of Iris radars rose 75% in the first six months of the year.