The Role of CFIUS in M&A

Deal certainty is among the most important issues that any company should consider when facing a company sale opportunity. One of the issues that can affect deal certainty for transactions with non-U.S. buyers is the review and clearance process by a little-known U.S. inter-agency body, the Committee on Foreign Investment in the United States (CFIUS).

CFIUS, comprised of 12 different executive-branch members (including members of the President’s cabinet), is the U.S. governmental entity that investigates acquisitions by non-U.S. buyers of U.S. companies where the transaction might implicate U.S. national security interests.  Post-9/11, the scope of U.S. national security interests has greatly expanded and includes factors such as the impact of the transaction on U.S. technological leadership in areas that have importance for national defense.  CFIUS pays particular attention to deals where the seller has export-controlled technologies, technologies critical to national defense or government contracts.

Filings with CFIUS are voluntary and are made jointly by the buyer and seller, although deals not voluntarily notified to CFIUS can be investigated or even rescinded post-closing, so deal participants are well-advised to consider whether a filing makes sense at the outset of the deal.  The CFIUS review process takes a minimum of 30 days (in addition to a minimum of three to five weeks to prepare the filing) and potentially much longer if additional time is needed by CFIUS to investigate the transaction.  CFIUS review culminates in either a clearance of the deal, or a decision to suspend or even prohibit the deal.  In practice, however, deal participants often modify deal terms to secure clearance or abandon the deal based on informal guidance from CFIUS throughout the process.

CFIUS is taking an increasingly active role in scrutinizing acquisitions by non-U.S. buyers.  Therefore, when a company approaches an M&A event with a non-U.S. buyer, it is important to work with counsel early in the deal process to identify a possible need for CFIUS review.

This post was authored by Daniel Green.

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