Bloomberg May 23 article “China’s $941 Billion Sovereign Fund Seeks More Resilient Assets”
We expect much greater scrutiny for foreign M&A deals as well as delays especially for direct investments made by Sovereign Wealth Funds, particularly China Investment Corp. We describe the ‘typical’ approval process timeline and outline key considerations in the highly opaque and secretive CFIUS review process.
What is the host country for investor?
- UK, Europe, Canada, Japan, Korea, raise few security or political issues
- 7 countries investing the most in the United States, all of which are United States allies (the United Kingdom, Japan, Germany, France, Canada, Switzerland, and the Netherlands) accounted for 72.1 percent of the value added by foreign-owned affiliates in the United States and more than 80 percent of research and development expenditures by such entities
- China raises unique issues
Does the acquirer have a good record of compliance?
- Focus on US, foreign laws and previous CFIUS commitments
- Focus also on acquirer’s record with respect to its own products or services or competition practices
Does the acquirer have state ownership?
- Have the acquirer’s leaders been implicated in any law enforcement or regulatory actions?
- Has the acquirer effectively complied with previous CFIUS commitments?
- Will investment raise political issues in Congress?
- How important are target’s assets to national security of the United States?
- Are there government contracts? With which agencies? Classified?
- Is target a direct supplier to U.S. government or subcontractor?
- Does the target have export-controlled technologies?
- Are the target’s assets considered “critical infrastructure”?
- Does target have outstanding litigation or competitive issues that could lead competitor to politicize CFIUS process?
- Who are the target’s non-government customers?
- Has the target effectively complied with previous CFIUS commitments?
- Does target have dominant position in market for key technologies or services?