M&A Guide 2025: Luxembourg

Following a sharp decline in 2020 due to Brexit and the COVID crisis, the Luxembourg M&A market began to recover in 2021 as the impact of the pandemic diminished. Shareholder activism drove deals across various sectors, such as cargo transportation and logistics, automotive and engineering, and TMT.

However, in 2022, dealmakers, especially in the real estate sector, faced an intricate environment for M&A, due to geopolitical tensions, an energy crisis, inflation, and rising interest rates, resulting in a reduced volume of M&A transactions and private equity deals.

While 2023 remained challenging, 2024 saw a notable increase in M&A activity, driven by a renewed market enthusiasm, easing inflation, and stabilising interest rates. Dealmaking rebounded – particularly in financial services, fund structuring, and sustainable finance – reflecting improved investor sentiment and strategic growth opportunities.

Despite economic pressures, Luxembourg remains an attractive jurisdiction for generating M&A transactions aimed at European-based targets, due to its legal and political stability, robust financial and legislative framework, and growing fund industry.

The deal volume for Luxembourg itself is rather small; however, the number of M&A deals steered through Luxembourg vehicles into other markets remains high. M&A targets in the private and public sectors are often not located in Luxembourg but in other jurisdictions.

Private M&A transactions continue to dominate the Luxembourg market, with public deals occurring only occasionally.

One of the most important public deals in 2024 was L’Occitane International S.A., a Luxembourg-incorporated global beauty and wellness company, completing its privatisation and delisting from the Hong Kong Stock Exchange (HKEX), following a successful voluntary general offer by its controlling shareholder, L’Occitane Groupe S.A.

The offer, launched in April 2024, valued the company at approximately €6 billion. The transaction became unconditional in August 2024, triggering a compulsory acquisition process, and the company’s shares were officially delisted from HKEX on October 16 2024.

The privatisation was financed through external debt facilities from Crédit Agricole Corporate and Investment Bank, alongside financing from Blackstone and Goldman Sachs Alternatives.

As for private M&A deals, the key sectors are mostly financial institutions, transportation and logistics, TMT, and business services. Sometimes there are also deals concerning the consumer and retail sector, and the industrials sector.

Among the M&A deals in the financial sector that occurred in 2024, Abacus Life Inc., a US-based life insurance settlement provider, completed the acquisition of Carlisle Management Company S.C.A., a Luxembourg-based investment firm specialising in life settlements, for approximately $200 million in December 2024.

Furthermore, ABN AMRO announced its acquisition of Hauck & Aufhäuser Bank, which has a branch in Luxembourg, from Fosun Capital. This was also a high-profile M&A transaction for the Luxembourg financial sector. Signing took place mid-2024 and closing is anticipated for Q2 of 2025. The transaction also has an impact on the other Hauck & Aufhäuser entities in the Luxembourg market.

Meanwhile, there were many deals in non-financial sectors in 2024.

In April 2024, Luxembourg-based satellite operators SES S.A. and Intelsat S.A. announced an agreement for SES to acquire 100% of the equity of Intelsat Holding S.à r.l. for a cash consideration of $3.1 billion to create a global leader in satellite communications. The transaction is subject to relevant regulatory clearances/filings, which are expected to be completed during the second half of 2025.

In July 2024, Europasolar S.à r.l. – a Luxembourg-based investment fund comprising international investors from Europe, North America, and Asia – acquired Rolling Wireless S.à r.l., a leading supplier of cellular network access devices to the automotive industry, from Fibocom Wireless Inc. for approximately $150 million.

In July 2024, Brasserie Nationale, Luxembourg’s largest brewery, announced its intention to acquire Boissons Heintz, a prominent wholesale drinks distributor. The deal attracted the attention of EU antitrust regulators, leading to a review due to concerns about potential impacts on competition within Luxembourg. Brasserie Nationale contested this review, asserting that the merger would not significantly affect competition or trade between member states. The outcome of this regulatory scrutiny is pending.

Lastly, in November 2024, InfraRed Capital Partners – a UK-based real estate, renewable energy, and infrastructure funds manager – signed a binding agreement to acquire Proximus Luxembourg Infrastructure from Proximus Group, a Belgian telecommunications company, for a consideration of €108 million. The transaction is expected to close in the first quarter of 2025, subject to regulatory approvals.

Due diligence procedures have become more rigorous to assess the financial situation of target companies, and the invisible impact of several factors, such as the recent geopolitical tensions, the energy crisis, and evolving regulatory frameworks.

While inflation has eased and interest rates are stabilising, deal structuring remains influenced by the high-cost environment and investor caution.

Purchasers continue to rely on mechanisms such as earn-out provisions to tie a portion of the purchase price to the performance of the target company after closing, to mitigate valuation risks. Vendor financing remains relevant, with sellers being asked to finance the deal by way of granting a vendor loan to purchasers that would be repaid in two or three years with certain conditions. In addition, purchasers might offer sellers the opportunity to roll over and participate in a new structure that purchasers have established with the transferred target company, as a minority shareholder, to have a portion of the purchase price paid in kind.

These strategies serve as effective risk allocation measures and give purchasers a degree of security while also addressing liquidity constraints they may face.

The investment funds industry continues to play a major role in the Luxembourg financial and legal market. As of December 31 2024, the total net assets of undertakings for collective investment – comprising undertakings for collective investment, specialised investment funds, and investment companies in risk capital – amounted to €5,820.088 billion, representing a 10.12% increase over the previous 12 months. This positive trend has been supported by optimism over rate cuts in 2024, amid declining inflation figures and despite geopolitical conflicts.

SPAC activity in Luxembourg, which was quite prominent before 2021, has remained subdued in the past year and in 2023, reflecting the global slowdown in SPAC activity. Given the developing market conditions and increased regulatory scrutiny, SPACs are unlikely to regain momentum, with traditional M&A and private equity-led acquisitions still the preferred dealmaking routes.

The main legislation is the law of August 10 1915 on commercial companies (the Corporate Law). The Corporate Law provides for all kinds of corporate entities and corporate instruments to create tailor-made structures for M&A transactions.

Another key piece of legislation is the law of May 19 2006 implementing Directive 2004/25/EU on takeover bids (the Takeover Law), which covers squeeze-out and sell-out rights, and contributes to M&A transactions of Luxembourg-based target companies. A natural or legal person acquiring, alone or with others, control over a company by holding 33.3% of the voting rights is required to make a mandatory takeover bid to all the holders of shares in the Luxembourg company.

The Takeover Law states that if the target company’s securities are not admitted to trading in the EU member state where it resides, the competent authority to supervise the bid will be from the member state responsible for the regulated market on which the company’s securities are admitted to trading.

The law of July 21 2012 governing the mandatory squeeze-out and sell-out of securities of companies admitted, or previously admitted, to trading on a regulated market, or having been offered to the public (the Squeeze-Out and Sell-Out Law), also plays a role. The Squeeze-Out and Sell-Out Law applies to the following scenarios:

• If all or part of a company’s securities are admitted to trading on a regulated market in one or more EU member states;

• If all or part of a company’s securities are no longer traded but were admitted to trading on a regulated market and the delisting became effective less than five years ago; or

• If all or part of a company’s securities were the subject of a public offer that triggered the obligation to publish a prospectus in accordance with Directive 2003/71/EC of the European Parliament and of the Council of November 4 2003 on the prospectus to be published when securities are offered to the public or admitted to trading, or, if there is no obligation, where the offer started in the previous five years.

The Squeeze-Out and Sell-Out Law does not apply during, and for a certain grace period after, a public takeover that is, or has been, carried out pursuant to the Takeover Law.

On November 24 2022, the Luxembourg parliament passed the law of November 30 2022 on competition (the New Competition Law), which entered into force on January 1 2023. It aims to overhaul the competition legislation and transpose into Luxembourg law Directive (EU) 2019/1 to empower the competition authorities of EU member states to be more effective enforcers. The New Competition Law transformed the independent administrative competition authority formerly known as the Competition Council into a public institution, the National Competition Authority (NCA), which allows the Luxembourg competition authority to act more independently.

The new legislative framework also introduced additional procedural guarantees and clarifications, aiming to enhance legal certainty in the NCA’s operations. This especially concerns its investigative powers, and the options to close proceedings.

The New Competition Law is not supposed to affect or pre-empt the ongoing legislative efforts to introduce merger control in Luxembourg. However, it can be viewed as a big step for future competition law developments.

The Luxembourg law on foreign direct investment screenings (the FDI Law), implementing Regulation (EU) 2019/452 on foreign direct investment screening, entered into force on September 1 2023. The law applies to all relevant transactions that were not completed before September 1 2023. The introduction of this regulatory framework may have significant implications for M&A transactions in relation to the choice of target companies by foreign investors.

Indeed, the new FDI Law introduced a national screening procedure with a mandatory notification and pre-approval requirement for direct investments made by investors from a third country outside the EU/EEA seeking to gain control of Luxembourg entities operating in activities considered critical for national security or public order. Critical activities include:

• The development, operation, and trade of dual-use goods;

• Activities in the sectors of energy, transportation, water, healthcare, communications, data processing, and storage;

• Aerospace;

• Defence;

• Finance; and

• The media.

Linked activities that involve research, production, access to sensitive information, or premises where the aforementioned activities are conducted also fall in the scope.

On July 19 2023, the Luxembourg parliament adopted the law of August 7 2023 on business preservation and modernisation of bankruptcy law, known as the New Insolvency Law, which entered into force on November 1 2023. It modernised the old insolvency law, introducing new preventative reorganisation procedures and measures for early financial difficulty identification, abolishing certain measures, and reclassifying fraudulent bankruptcy as an offence instead of a crime.

On May 3 2023, the Luxembourg parliament adopted a law transposing the seventh amendment to Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC7) into national legislation. The new DAC7 provisions contain several sections that complement and extend the existing domestic rules on tax transparency and exchange of information.

In addition, on October 17 2023, the Council of the EU adopted a new directive amending Directive 2011/16/EU on administrative cooperation in the field of taxation (DAC8). The amendment creates new reporting obligations for all service providers or operators involved in providing crypto-asset services for EU resident customers.

DAC8 also expands the scope of exchange of information on tax rulings to cover advance cross-border rulings and advance pricing arrangements for high-net-worth individuals and a minimum financial penalty for non-compliance with certain reporting obligations. DAC8 entered into force on November 13 2023 and member states have until December 31 2025 to transpose the rules of the new directive into their national law.

The implementation of effective ESG policies and strategies and the disclosure of sustainability corporate aspects are driving factors in the current M&A market, which is reflected in the evolution of the regulatory framework at the European level. Examples include:

• Regulation (EU) 2019/2088 on sustainability-related disclosure in the financial services sector; and

• Regulation (EU) 2020/852 on the establishment of a framework to facilitate sustainable investment.

On the same topic, the Corporate Sustainability Reporting Directive (CSRD) entered into force on January 5 2023. The CSRD requires a wide range of large companies, as well as listed SMEs, to disclose information on the impact of their activities on people and the environment.

The first category of the impacted companies will have to apply the new rules starting from the financial year of 2024, and publish their reports in 2025. Non-EU companies with substantial activities in the EU will also be subject to the CSRD disclosure requirements.

Finally, on December 14 2023, the Council of the EU and the European Parliament agreed on a compromise text for the Corporate Sustainability Due Diligence Directive (CSDDD). The CSDDD aims to introduce a sustainability due diligence requirement for large EU companies and non-EU companies with significant EU activities to address adverse the human rights and environmental impacts of their operations, and of their subsidiaries and value chains. The CSDDD is expected to enter into force in the near future, following its formal adoption and publication in the Official Journal of the EU.

As the European legal framework continues to evolve, more and more ESG-related standards will have to be respected by target companies. This will inevitably result in higher acquisition costs in several ways.

First, an enhanced ESG due diligence procedure will need to be carried out to assess how the ESG disclosure standards are implemented by target companies, and a post-acquisition assessment regarding the compatibility of the business strategy with ESG principles.

It is now common that an ESG adviser is involved in the early stage of an M&A transaction to provide consultations on ESG-related topics for both parties. Moreover, the management of the target companies must be provided with specific ESG competences to integrate sustainability matters into their decisions in the short, medium, and long term. As a result, there is a growing trend of ESG factors playing an important role in acquisition decision making.

In January 2025, the Luxembourg parliament adopted bill No. 8053 to implement Directive (EU) 2019/2121 as regards cross-border conversions, mergers, and divisions (the MC Law). This new legislation introduces comprehensive rules for cross-border mergers, transformations, and demergers within the EU, together with some new provisions to implement an anti-abuse control mechanism and strengthen minority shareholder and creditor protections.

At a national level, the MC Law introduces two new forms of merger by absorption:

• An upstream merger, where a company transfers by way of dissolution without liquidating the entirety of its assets and liabilities to its parent company; and

• A side-stream merger, where a company transfers the entirety of its assets and liabilities to an existing company without the issuance of new shares, under the condition that one person is the direct or indirect shareholder of all the shares in the merging companies.

The MC Law will enter into force four days after its publication in the Luxembourg Official Journal, which is expected in February or March 2025, as the State Council waived its constitutional vote on February 4 2025.

Furthermore, on August 23 2023, the Ministry of the Economy introduced before the Luxembourg parliament a bill (No. 8296) regarding a mandatory national notification and screening procedure for mergers concerning certain entities operating in Luxembourg. The bill provides that any merger, acquisition, or creation of a joint venture that does not fall under the EU merger control regime set out in Council Regulation (EC) No 139/2004 of 20 January 2004 on the control of concentrations between undertakings shall be notified in advance to the NCA if two cumulative thresholds are met:

• The aggregate turnover realised in Luxembourg by all enterprises involved in the concentration exceeds €60 million; and

• At least two of the enterprises participating in the concentration generate an individual turnover in Luxembourg of at least €15 million.

The bill on a merger control regime would give the NCA the power and the tools to carry out ex ante control of certain M&A or other alignments between undertakings that may have a restrictive effect on competition in Luxembourg, and allow early detection of such threats to competition, potentially limiting damage to consumers and undertakings.

Due to the formation of a new government at the end of 2023, the legislative adoption process has been delayed. Nonetheless, developments may occur throughout 2025, with the potential impact of the new regime on M&A transactions likely to be assessed in the following years.

Common questions in Luxembourg relate to the best choice of private equity fund vehicle for M&A activity. Tax is always an important element when setting up a structure. The structure needs to:

• Be tax, DAC6, and ESG compliant;

• Serve the interests of the investing group and target entity; and

• Consider the upcoming legislative initiatives of the EU.

Technology advancements have significantly streamlined negotiations and deal closings, especially for parties that do not reside in the same country. Some law firms are increasingly integrating AI software to conduct legal due diligence. AI software enables rapid identification and extractions of key provisions by reviewing thousands of contracts and other documents quickly. However, advanced technology is not a substitute for human expertise; rather, it is a supportive tool enabling transactions to be completed more swiftly and efficiently, and often at a lower cost.

Key factors for public M&A involve complying with the provisions of the Takeover Law. This includes, in particular, complying with the requirement to notify supervising authorities and with reporting requirements under the law. Moreover, parties to an M&A transaction need to assess how the managing bodies of the takeover target are to be approached and which governmental authorities need to be notified.

For voluntary offers, a condition on reaching a specified percentage of share capital and voting rights of the target company to be acquired might apply.

During a bidding process, all shareholders of the same class of shares (if categorised) shall be treated equally. In addition, a bidder that has acquired control of the target company must make a mandatory offer to all shareholders who hold the same class of shares at an equitable price.

A locked-box mechanism might span a minimum period of six months to two years. Completion accounts need to be presented and they may be audited. In the wake of the pandemic and/or the recent economic crises, earn-out provisions are now commonly seen in M&A transactions to mitigate risk allocation and diminish the adverse impact from the market.

In private takeovers, deal conditions apply to certain transactions. The conditions must comply with the applicable law and should be identified duly in advance of starting the deal. The Corporate Law provisions apply, as do the constitutive documents of the privately owned target entity.

A shareholders’ agreement will most likely also be put in place after completion of a deal if a seller remains in the target company as a minority shareholder, which is commonly seen in private equity transactions. The shareholders’ agreement will contain provisions pertaining to drag-along, tag-along, and pre-emptive rights of shareholders, which would be discussed and agreed in advance as conditions of the acquisition.

Parties to M&A transactions are inclined to have the share purchase agreement governed by, and construed in accordance with, the law of the country where the target entity is located. Share purchase agreements involving Luxembourg-based target entities are typically drafted under, and made subject to, Luxembourg law.

Exit strategies remain the standard ones. IPOs are often prepared as an exit strategy, but a sale is often preferred to an IPO. Sales to strategic sponsors are rare; however, sales to, or among, private equity firms are increasingly common.

Given the persistent but easing inflation and stabilising interest rates, M&A activity in and through Luxembourg is expected to continue its gradual recovery. Dealmakers have adapted to a higher-cost environment and although some investor caution remains, especially in the real estate and private equity sectors, deal activity is picking up, supported by improved market confidence and strategic consolidation.

Furthermore, COVID should not be a major obstacle to M&A activities any more, although regulatory complexity and geopolitical risks, particularly in financial services and cross-border transactions, continue to shape dealmaking strategies.

A heightened level of due diligence remains a key feature of transactions, as buyers and sellers continue to prioritise cost efficiency and operational resilience.

The increasing prominence of ESG considerations will become both a risk and business opportunity for M&A deals. Companies and investors that are facing potential ESG risks will have to seek alignment with counterparties to solve ESG integration issues by acquiring or merging with ESG-adjacent assets and activities.

Investments in fintech, AI, and emerging technologies, such as Luxembourg’s growing space sector, are expected to accelerate, with an increasing number of private equity and venture capital structures driving growth in these industries.

Finally, M&A transactions launched from Luxembourg vehicles into other EU jurisdictions will remain more important and voluminous than M&A transactions within the Luxembourg market itself, further strengthening Luxembourg’s role as a hub for structuring cross-border transactions.