Safeguard Against CFIUS
By Sean Neary, Executive Vice President, Financial Communication
The Committee on Foreign Investment in the United States’ (CFIUS) is an interagency committee chaired by the Secretary of the Treasury tasked with reviewing inbound investments for national security concerns. It is a little known, yet very powerful arm of the American government that has broad authority to review mergers and acquisitions and block multibillion dollar deals.
Since its creation by Congress in 1975, CFIUS has traditionally worked behind the scenes to protect America’s national security interests when a foreign company seeks to obtain control of a U.S. company. Traditionally, CFIUS has applied the same review procedures to each covered transaction, regardless of the nationality of the investor. The Trump Administration, however, has taken a different approach. In a pursuit of economic nationalism, the Trump Administration is increasingly using CFIUS to protect IP against America’s biggest trade foe – China. In fact, eight of the last 10 transactions rejected by CFIUS involved Chinese companies.
Late last year, for example, the Trump administration blocked the $1.3 billion acquisition of Lattice Semiconductor, an American chip manufacturer, by Bridge Capital Partners, a US-headquartered private equity firm backed with Chinese funding.
The power of CFIUS will only increase if Congress has its way.
The Foreign Investment Risk Review Modernization Act of 2017 (FIRRMA) is a bipartisan, bicameral bill that would increase CFIUS’s power by increasing the scope of transactions subject to CFIUS’s jurisdiction, making certain notifications mandatory, and establishing a process that would allow for expedited review and approval of certain transactions. The bill is endorsed by both the Treasury Department and President Trump and is quickly making its way through Congress and could become law later this year.
The growing regulatory scrutiny will dramatically impact foreign investment in the U.S. for years to come. Given the current political climate in the United States and broad bipartisan support for expanding CFIUS, it is crucial that U.S. companies contemplating cross-border transactions evaluate the deal through a national security and foreign policy lens.
Navigating such transactions given today’s current environment can cause communications challenges which arise from reviews of foreign investments. To succeed, it is imperative for companies to partner with seasoned communications professionals who understand this process and how best to position a transaction with potential critics, including policymakers, advocacy organizations and the media. In doing so, companies can save both time and money by being proactive and ensuring any international deals meet CFIUS standards.