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Foreign direct investment into the US: Return to a process-oriented approach
Are you planning a cross-border transaction that includes foreign direct investment into a US business? A renewed governmental focus on methodical analysis and standard review processes means careful preparation could have an impact in smoothing the way for your deal.
The Committee on Foreign Investment in the United States (CFIUS) reviews a broadly defined array of foreign direct investment (FDI) transactions from a US national security perspective. Under the new Biden Administration, CFIUS is likely to revert to a methodical, process-oriented approach when reviewing proposed cross-border deals. At the same time, deeper scrutiny may continue to focus on proposed foreign investments linked to countries that the US government views as potential adversaries and/or into US businesses involved in strategic areas, such as critical technologies, critical infrastructure or US-sensitive data (TID).
What this means for you
If you are planning a cross-border investment into the US, you should analyze and address CFIUS issues early in the deal process, particularly if your transaction includes investment from a China or Russia- related entity, or a business involved in TID or otherwise sensitive industries.
Steps to take now
Plan to get the best possible outcome by proactively addressing any concerns about your transaction:
- Understand the CFIUS risk – You should understand all elements of the transaction that create CFIUS risk and plan how to allocate that risk between the parties. In addition, make sure you have an effective CFIUS strategy, which is realistic in terms of expectations and anticipates issues that may be raised by CFIUS as you navigate through the process.
- Stay attuned as you go through the CFIUS process – Prepare to emphasize the overall merits of your proposed transaction, and remain objective and realistic as you go through the process. Often the questioning rounds from CFIUS during a review can be quite revealing. They (as well as any other data points from CFIUS) should be evaluated and addressed carefully.
The good news about returning to a process-oriented CFIUS review approach is that, with careful planning and an effective strategy, you can materially improve the chances of successfully navigating through the CFIUS review process.
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