The Minister Steps In – Lessons from the Nexperia Case for M&A Professionals

For M&A practice, and in particular its Dutch legal aspects, this case offers valuable lessons.

In an unprecedented move, on 30 September the outgoing VVD Minister of Economic Affairs, Karremans, intervened forcefully at Nexperia, the leading semiconductor manufacturer and former division of NXP Semiconductors, headquartered in Nijmegen. Since 2019, the company has been partly owned by the Chinese firm Wingtech Technology.

Invoking the Availability of Goods Act (Wet beschikbaarheid goederen, Wbg) from the Cold War era (1952 (!)), the minister issued an order enabling him, for a provisional period of up to one year, to block decisions taken by Nexperia if these are “(potentially) detrimental to the company’s production capacity, knowledge position or continuity, the future of Nexperia as a Dutch and European company, and the preservation of this crucial player in Europe’s value chain.”

Immediately afterwards, European board members of Nexperia turned to the Enterprise Chamber (Ondernemingskamer), which—one day after the minister’s order—suspended the Chinese CEO Zhang Xuezheng (nickname: ‘Wing’), appointed a Dutch interim director, and placed all shares (minus one) under the administration of a Dutch lawyer.

As a result, Nexperia was effectively frozen. The response from China followed swiftly: export restrictions were imposed on chips produced at Nexperia’s Chinese factory in Dongguan, which largely supplied the automotive industry, including BMW and Volkswagen. This caused major disruption and led, among other things, to profit warnings, including from Honda. The Netherlands thus found itself caught in a geopolitical storm, with even Presidents Trump and Xi reportedly involved in negotiations.

The minister stated that the order was issued due to the “significant scale and urgency of governance deficiencies” at Nexperia. The ruling of the Enterprise Chamber shows that CEO Wing was no longer cooperating with governance changes agreed with the ministry, which were intended to prevent Nexperia from being affected by US trade restrictions imposed on its Chinese parent company, Wingtech.

Wing had also used Nexperia’s financial resources to prop up his other financially distressed Chinese chip manufacturer, WSS (not part of the Wingtech group), among other things by placing meaningless orders. In addition, he revoked banking authorities from, among others, the CFO and transferred these powers to proxies. Co-directors who challenged him on this conduct were dismissed without consulting the works council. Meanwhile, the minister appears willing to suspend the order, which may already have happened by the time you read this.

All in all, this is an exceptional case that M&A professionals will not encounter on a daily basis. Nevertheless, for M&A practice—particularly its Dutch legal dimension—it offers important lessons.

1. The State Is Becoming Increasingly Active
The minister’s intervention on the basis of a somewhat obscure 1952 statute is, as he himself acknowledged, “highly exceptional”. However, increasing government involvement in transactions and corporate operations is not. This is also reflected in stricter foreign direct investment (FDI) rules in the Netherlands, including the introduction of the Investments, Mergers and Acquisitions Security Screening Act (Wet Vifo) on 1 June 2023.

The Wet Vifo aims to protect vital providers, operators of business campuses and sensitive technologies in the Netherlands. It applies retroactively to 8 September 2020, with the Minister of Economic Affairs granted an eight-month period to subject transactions already completed in the past to review. The acquisition of Nexperia by Wingtech took place in 2019, before the Wet Vifo came into force.

The question is whether Nexperia would fall within the scope of the current Wet Vifo. After the British government reversed the acquisition of Newport Wafer Fab due to national security risks, Nexperia’s 2022 acquisition of the Delft-based tech company Nowi was assessed under the Wet Vifo. Following a lengthy investigation, on 27 November 2023—one year after the acquisition and while integration was already well under way—the minister ultimately concluded that the transaction did not fall within the scope of the Act and was therefore permitted. The scope of the Wet Vifo is expected to be expanded in the near future to include additional categories of sensitive technology, such as biotechnology, artificial intelligence (AI), nanotechnology, advanced materials, sensor and navigation technology, and nuclear technology for medical use.

2. The Enterprise Chamber Remains Proactive
The inquiry proceedings once again demonstrate that the Enterprise Chamber (OK) remains a unique court, willing to intervene swiftly and decisively, sometimes in unconventional ways. Given everything that was going on at Nexperia, the intervention itself was not surprising—what was remarkable was the manner in which it occurred. Within hours of receiving the inquiry request, the OK imposed far-reaching immediate measures ex parte, without first hearing the parties (!), in order to safeguard Nexperia’s continuity. The parties were also instructed to keep the ruling confidential. Only at a later stage did a hearing with the parties take place and did public reporting follow, after the news had already leaked. This approach attracted considerable criticism, but it clearly illustrates that, when urgent action is required, the OK can provide a route for swift and effective intervention in corporate governance. This can also be highly relevant in the context of major transactions.

3. Dutch Employee Participation Remains Highly Relevant
In its decision, the OK took into account the fact that CEO Wing had ignored the works council, despite this being a legal requirement. As is well known, the works council must be informed in a timely and comprehensive manner about the consequences for the Dutch undertaking and must be given the opportunity to formulate an independent and well-considered opinion. Failure to do so can quickly lead to legal intervention. This issue arises in virtually every transaction.

The Nexperia case confirms the increasing activism of the Dutch government and the scope for rapid and far-reaching intervention under Dutch law. Caution is therefore advised in every proposed transaction.

This article previously appeared on the website of 
M&A Community Netherlands.