Many dealmakers expect an increase in cross-border M&A over the next year, but a growing protectionist approach on the part of European authorities could put a spoke in the wheel. As the U.K. and French governments proceed with plans that broaden their abilities to block foreign takeovers of companies deemed strategic, cross-border buyers in the middle market are well-advised to prepare for extra loopholes.

British politicians actually demanded that London stop a takeover of drug maker AstraZeneca plc (LON:AZN) by U.S.-based Pfizer Inc. (NYSE: PFE), while the French government issued a decree giving itself the power to block General Electric Co.'s (NYSE: GE) purchase of power plant builder Alstom SA.

"This is a decree we should have adopted a long time ago," says French Economy Minister Arnaud Montebourg. Recently he told reporters: "You can't ask a country to give up on the interests it considers strategic and essential." He would prefer a European pair-up with Siemens AG, a German engineering company that competes for acquisitions with GE, most recently buying assets from London-based Rolls-Royce Holdings plc for $1.3 billion.

Montebourg, an opponent of GE's bid, supports the government's posture to veto foreign investment in sectors, including energy, water and transportation. Montebourg cites similar measures taken by Germany and Italy.

The decree speaks to the efficiency of the European Union and how it looks to protect the interest of citizens, explains Olivier Deren, a partner at law firm Paul Hastings LLP based in Paris.

"Each government in Europe is currently trying to show that they can remain in the game."

The trend may be taking a cue from Latin America. In 2012, Argentina essentially blocked foreign companies from buying rural land and acreage in the country-assets that often accompany major agricultural and energy deals. The move was seen as an apparent backlash toward China's shopping spree of Latin American assets and companies. As a result, many companies had trouble completing deals.

To avoid the same fate, GE chief executive Jeff Immelt recently went to Paris to press his case for buying Alstom's energy assets, offering additional incentives, including the sale of Alstom's wind-power unit to French investors and the exploration of a joint venture involving GE's railroad-signaling businesses.

GE's acquisition of Alstom would be its biggest, while Pfizer's bid would have been the largest foreign takeover of a British company. Both deals have buyers wondering if the protectionist stance will chill cross-border M&A. If it does, strategic buyers "will have to think about ways to approach authorities to get support," says Deren. "That's exactly what GE did."

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