DealLawyers.com Blog

This Freshfields blog discusses what the partial federal government shutdown, which began in mid-February, means for dealmakers. It says that the Treasury and all CFIUS agencies (except DHS) remain funded, but the shutdown still has an impact on deals, and that impact varies more, deal-by-deal, than other shutdowns.

Similar to previous government shutdowns, CFIUS statutory deadlines are currently tolled, but the impact of this shutdown is more limited and varies between transactions, depending, for example, on the stage at the time of the shutdown. The Committee is providing feedback on draft filings, requesting information from transaction parties, negotiating mitigation agreements, and approving transactions.

However, transactions where DHS has leading equities will likely experience longer delays, and CFIUS generally is not formally initiating the review of transactions that were not already on the clock, potentially resulting in a significant backlog as the shutdown drags on. Therefore, while Treasury is trying to move cases forward and minimize the negative impacts to transactions caused by the shutdown, parties need to be prepared for extended timelines.

The blog suggests:

– Determine the longstop date for your transaction. Because CFIUS’s deadlines are tolled, CFIUS approval could be significantly delayed. Transaction parties should assess whether the longstop date should be extended or consider the risks of closing the transaction prior to receiving CFIUS approval.
– Assess the potential impact of the partial shutdown on your transaction.  If there are any connections between the transaction and DHS such as, for example, contracts with DHS, the current partial shutdown may have a substantial effect on CFIUS’s ability to clear the transaction.
– Promptly submit filings. CFIUS is still actively reviewing cases, and all regulatory requirements imposed on parties remain in effect during a lapse in appropriations. Not waiting to file your transaction can help ensure that it is not at the back of the line once the shutdown ends should there be a significant backlog and CFIUS may begin evaluating the transaction even if it has not initiated the review period.
– Communicate with CFIUS on changes or updates to the transaction.  Parties should generally keep the Committee informed of their transaction and key transaction deadlines. Additionally, promptly responding to CFIUS’s questions helps mitigate the risk of longer delays.

– Meredith Ervine