June 28, 2019

Cross-Border: CFIUS’s Impact on Integration Planning

The changes & enhancements to CFIUS’s national security review that are underway following last year’s enactment of FIRRMA are complicating many aspects of cross-border transactions.  This PwC blog highlights how these changes are impacting the process of planning for the integration of an acquired company:

As CFIUS continues to develop regulations to implement FIRRMA, dealmakers will need to consider integration options earlier in the process and consider the following questions: What are the minimum integration steps to successfully close a deal? How much integration is realistic immediately post-close?

In the months after close, it will also be important to monitor and assess newly-merged companies regularly, particularly any agreed-to mitigation measures to demonstrate adherence to CFIUS requirements. Failure to comply with the terms of a National Security Agreement (NSA) can lead to CFIUS re-examining a transaction, with potentially serious consequences for the parties and shareholders.

An effective way to navigate through the new regulations is to start conversations with CFIUS committee staff early before formally filing a transaction for review, demonstrating what the parties are considering early on and the potential national security implications of a transaction. This is a crucial step, and dealmakers are uniquely positioned to stay ahead by also explaining the business rationale for the transaction.

Through this process, dealmakers can reassess the deal thesis based on CFIUS’s feedback requirements. They can also decide if they should continue pursuing the deal, assess the need for an NSA or mitigation measures, and refine their integration strategy where necessary.

John Jenkins