National security

National Security Essential to Cross-Border M&A

Foreign direct investment (FDI) into the United States has continued unabated in 2016, with Chinese buyers leading the charge. Most of these acquisitions fall into the $1 billion-plus range, but China is also looking to the middle market to gain a strategic foothold in the U.S. And as foreign investment in the U.S. continues to swell, so too does regulatory scrutiny of cross-border transactions.

A critical element of FDI is the involvement of the committee on foreign investment in the United States (CFIUS). Chaired by the U.S. Secretary of the Treasury, this interagency task force within the U.S. government is responsible for the review of FDI that could result in the control of a U.S. business or critical assets, evaluating the impact of such transactions on national security.

The complexity of navigating the regulatory process has increased in tandem with international interest in taking advantage of U.S. resources and innovative technologies.” These deals are making headline news more frequently, with national security concerns highlighted front and center for the general public―putting transactions, timelines, security assessments and compliance measures in the spotlight.

While transactions in many industries are subject to CFIUS review, companies in the aerospace and defense, manufacturing, critical technologies, and natural resource industries file the majority of notices. However, only a small fraction of those notices (less than 10 percent) warrant binding mitigation measures.