• UAE subsidies under scrutiny in two other in-depth FSR probes
• Risk reduced as passive Middle Eastern money common in PE deals
• Bidding dynamics between strategics and sponsors might be shifting

The role of Abu Dhabi’s sovereign wealth fund as a co-investor in EQT’s takeover of Qiagen might trigger detailed scrutiny by the European Commission (EC) under the Foreign Subsidies Regulation (FSR), according to two competition lawyers.

However, this deal is just the latest example of how money from Middle Eastern investors permeates a significant portion of today’s private equity dealmaking, especially in the large-cap space, the first and a third competition lawyer said. The fact that these sorts of investments are not rare, but rather common practice across the industry, might make an FSR review less of a risk factor, they added.

According to the second lawyer, it could be an interesting and lengthy FSR review, but the fact that EQT is the main acquirer makes it difficult to imagine a credible theory of harm to oppose the deal.

Qiagen, a Frankfurt-listed molecular diagnostic company, agreed on 21 October to a EUR 10.8bn enterprise value takeover offer by private equity firm EQT, with the Abu Dhabi Investment Authority (ADIA) and Canada Pension Plan Investment Board (CCP Investments) acting as co-investors in the transaction.

The deal, which is subject to a minimum acceptance threshold of 50% plus one share, is expected to complete in mid-2027, according to the deal announcement.

Two of the EC’s three in-depth FSR investigations to date were based on concerns that foreign subsidies from the United Arab Emirates (UAE) may distort the EU market. However, practitioners pointed to significant differences between those two deals – PPF/e& and Covestro/Adnoc – and Qiagen/EQT.

When analysing a merger under FSR rules, the second lawyer explained, the EC looks at potential distortions caused by foreign subsidies both during the acquisition process and post transaction.

In PPF/e& and Covestro/Adnoc, the concerns over distortions post transaction were more prevalent, but Qiagen/EQT does not seem to raise the same levels of worry in that respect, this lawyer said. That is because ADIA is not the main acquirer, so it has fewer ways to inject money into the company, the lawyer added.

In the two previous cases, the Commission found issues with unlimited state guarantees that Adnoc and e& were benefitting from, so EQT and ADIA can expect some questions in that regard, according to this lawyer.

As for potential distortions during the acquisition process, Qiagen reportedly attracted interest not just from EQT but from other potential buyers, including KKR, TPG, Advent and Bain Capital.

In processes with several interested buyers such as this one, the EC is expected to investigate the alternative bids for Qiagen and the prices that were offered, according to the second competition lawyer.

To rebut suspicions that it overpaid for the asset, EQT might be asked to provide information on the benchmarking assessments that it did in the runup to the offer, the second lawyer said.

The fact that EQT is the main party in the transaction makes it harder for the EC to pursue a case, because the sponsor would have made sure its bid was at a level where it can make a return on the asset, she added.

Asked whether competing bidders are likely to complain to the EC if they feel they were outbid due to the influence of foreign subsidies, the first competition lawyer said that as far as private equity firms go, “that is not their style”.

On top of that, he noted that money from Middle Eastern investors is “all over” these sorts of transactions. The third competition lawyer agreed and added that it is not uncommon for private equity firms to tap into these funds and include Middle Eastern players as co-investors in their deals.

In EQT’s case, ADIA’s involvement in the deal was laid bare because information disclosure obligations are stricter when acquiring a publicly listed company.

Strategic bidders would be more likely to complain about subsidy distortions, the first competition lawyer said.

“There is usually a trade-off between strategic buyers versus private equity ones. Strategic buyers, at least in theory, can offer more because they can realise deal synergies that private equity firms that are doing a standalone acquisition usually cannot,” this lawyer said.

However, if a private sponsor can tap into Middle Eastern money, it may be able to outbid the strategic, the lawyer added.

“Traditionally, private equity players come in lower than the strategics. The trade-off is that strategics typically are thought to raise more regulatory issues, so the approval process is longer, closing certainty may be less, but the price is high.”

“Private equity would always try to lowball, but with all this money coming into private equity, I’m not so sure that holds anymore,” he concluded.

The European Commission, EQT, Qiagen and ADIA declined to comment.