Foreign Direct Investments in Romania: What Does the New Draft Guidance on Notifications, Soon to Be Adopted by the Competition Council, Clarify?

With some delay (but, we’d say, not too late), we have finally taken the time to review the draft of the new guidance set to be adopted by the Competition Council (“Draft Guidance”).[1] We went straight to the point and selected what seemed clear and immediately impactful. Here’s what we took from the document.

Determining the Investment Value in Acquisition Transactions

In the context of acquisition transactions, correctly determining the investment value is essential for the purpose of foreign direct investment notification. The Draft Guidance sets out criteria for this assessment, providing a comprehensive approach for various specific scenarios.

1. Acquisition of Participation Interests

When an investment is made by acquiring shares or equity interests, its value is determined based on the price paid for the securities and/or the capital provided by the investor. This is the basic rule under Article 4(1)(a) of the Draft Guidance.

2. Financing the Acquisition and Its Impact on Investment Value

If the investor obtains financing for the acquisition, either through a loan or a financing agreement, the investment value includes not only the transaction price but also the total loan amount and accrued interest (Article 4(4)). This aspect is crucial to avoid underestimating the investment and to reflect the full financial commitment involved.

3. Impact of Earn-Out Mechanisms on Investment Value

In many transactions, the final purchase price is not fixed but depends on certain performance conditions or future financial results. This mechanism, known as earn-out, must be taken into account when determining the investment value. According to Articles 4(7) and (8), if an investment is carried out in multiple stages or includes conditional financial commitments, the total investment value will also reflect these amounts.

4. Multi-Jurisdictional Transactions and Allocating Investment Value

For acquisitions involving multiple jurisdictions, determining the investment value for the Romanian component can be complex. Article 4(9) states that if the price allocated to the Romanian entity or assets is not separately specified, the valuations provided by the parties will be used. Otherwise, the total investment value will be considered the overall value of the multi-jurisdictional transaction.

Conclusion

Determining the investment value is a process that requires careful consideration of all financial components involved. Whether it concerns the acquisition of participation interests, the use of financing, the inclusion of earn-out mechanisms, or multi-jurisdictional transactions, the Draft Guidance provides a clear framework for assessing this value. A proper understanding of these aspects is essential for investors and their advisors in making informed decisions and ensuring compliance with regulatory requirements.

[1] Draft Guidelines issued in application of Art. (5) of Government Emergency Ordinance no. 46/2022 on measures implementing Regulation (EU) 2019/452 of the European Parliament and of the Council of March 19, 2019 establishing a framework for the examination of foreign direct investments in the Union and amending and supplementing Competition Law no. 21/1996, available here: https://www.consiliulconcurentei.ro/wp-content/uploads/2025/02/Instructiuni_CEISD_11.02.2025.pdf