Far from a Done Deal

By Neal Wolin and Alex Finnegan

Recently, the Committee on Foreign Investment in the United States (CFIUS) has been thrust into the limelight with a spate of high-profile deals. An inter-agency committee of the US government, CFIUS has the authority to review, for national security reasons, any transaction that would result in a foreign entity having control of a US asset. CFIUS has the power to investigate, modify or recommend that the president block any transaction for which it judges national security concerns cannot be mitigated.

This review process is far from new; the committee was created more than 40 years ago, but its membership and responsibilities have evolved. Amid an uptick in mergers and acquisitions (M&A) in the United States, a number of CFIUS-reviewed transactions have been widely reported in the media, keeping CFIUS in the public eye.

CFIUS reviews need not strike fear in the hearts of companies. How businesses communicate through a transaction will be crucial to its success.

1. Don’t underestimate the importance of educating stakeholders – investors, analysts, media, members of Congress – on the CFIUS process. Continually explain the process and purpose of the review from the time of its announcement through its completion. It takes time, especially for those unfamiliar with the process, to understand CFIUS and what constitutes a national security concern. Be proactive about education.
2. Do anticipate what might present national security concerns in the eyes of the US government. Working closely with outside counsel, prepare the appropriate responses for any publicly raised concerns. It will not be hard for observers to discover where problems might lie or draw incorrect conclusions based on speculation. Don’t be caught off-guard. Prepare for a range of scenarios and plan your response.
3. Don’t feel pressured to discuss the timetable for CFIUS review. News reporters will hold you to it and any delays will lead them to believe something is wrong.
4. Do brief and activate independent, third-party voices who can talk off the record to reporters and other stakeholders. They don’t necessarily have to understand the specifics of your deal, but they can help the press and the public understand the process.
5. Don’t forget to make sure your outside counsel has briefed other CFIUS lawyers in Washington, as appropriate. It might help to ensure they understand the outlines of your deal and, in the process, minimize unnecessary speculation.
6. Do think holistically about other stakeholders. Questions about CFIUS and national security can make employees, customers, and suppliers just as anxious as investors and reporters. Make sure you communicate the details, when possible, with these groups as well.
7. Don’t pretend the process doesn’t exist. While the committee may not publicly speak, you ultimately decide what you say and don’t say in public. You may need to set the record straight if speculation arises or when you have a securities law obligation to do so. Coordinate early with CFIUS counsel and any other advisers to anticipate potential issues and prepare the appropriate public responses. Ideally, this would take place prior to a deal announcement. Maintaining regular communication among counsel, communications advisers, and the company will help ensure that everyone remains informed and issues are contained.

About the authors: Neal Wolin, Senior Counselor at Brunswick Group, was formerly Deputy US Treasury Secretary and chaired CFIUS from early 2009 until late 2013. Alex Finnegan is a Director specializing in regulatory and public affairs. Both are based in Brunswick’s Washington, DC office.