Ihe future military programming law will create new financing needs in defense industry and technologies. The fragmentation of this sector and the large number of retirements of managers of the SMEs that make it up in the coming years will also contribute to a movement of consolidation. This will probably arouse the interest of investors. But when these are foreign, debates resurface, sometimes heated, on the preservation of national sovereignty and the maintenance of these companies under French control.
This is currently the case with the project to sell Segault to the American group Flowserve Corporation. The Ministry of the Armed Forces has announced that it opposes this project, even though this company is no longer under French control, but Canadian, for a long time.
It should be remembered that, while the regulations on foreign investment allow the State to prohibit the acquisition by a foreign investor of a French company in a sensitive sector, it also allows it to authorize it subject to acceptance by the investor of various protective commitments of national interests. In the event of breach of these commitments, very heavy penalties are provided for, which may go as far as imprisonment.
In the defense sector, these commitments may relate in particular to the prohibition of the application of foreign regulations on export control, the establishment of specific governance or even the establishment of technological barriers partitioning the access of investor-sensitive information and protecting it from foreign regulations. The foreign investor may also have to commit to a minimum level of industrial investment in France or accept a minority stake from the French State accompanied by specific rights.
The military programming law, if adopted as it stands, will further increase the State’s locking power. In particular, it will make it possible to impose the constitution of strategic stocks on companies manufacturing and trading war materials, or to order the priority execution of State orders within the framework of a defense and security market. , including subcontractors.
Specific constraints
Despite these powers of control, the activity of certain companies is sometimes so sensitive that the search for a French buyer will be favoured. With regard to foreign investment from countries allied with France, the State veto must however be reserved for the most sensitive situations so as not to degrade the attractiveness of French territory or the chances of French companies to achieve investments in the home country of the investors concerned. It will be recalled, for example, that the American defense budget amounts to approximately 850 billion dollars (792 billion euros) per year, a large part of which benefits industrialists, including French, established in the United States, when the French military budget for 2023, 45 billion, represents less than 6% of this amount…
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