Yao Yao reporter reported in Shanghai
Guide
Sun Chuan suggested that evaluation and response to the risk of CFIUS review should be initiated as soon as possible. 'Relevant experts should be invited to conduct an early analysis on the subject matter of the investment, including the portfolio of assets and intellectual property portfolio, whether the trading structure is a holding or an overall acquisition or a minority Equity control, or just acquiring assets, doing these analyzes as early as you can is actually saving you money because the last thing you want is trading to come to a critical stage and you suddenly find yourself facing CFIUS. "
According to Thomson Reuters 21st Century Business Herald data provided show that so far this year, China's scale of mergers and acquisitions to the United States dropped as of November 2, so far this year has disclosed China-made mergers and acquisitions in the United States was 13.88 billion US dollars, while the same period last year At 60.36 billion U.S. dollars, a decrease of nearly 80%.
'The reasons behind this are multiple, including the Chinese government's stepping up its supervision of overseas investments and the U.S. scrutiny of foreign investment, and both buyers and sellers have become more cautious.' 'The combination of many factors led to a drop in trading volume.' Morgan Chai Lian, Joint Chief of North Asia M & A Department, said on the telephone of 21st Century Business Herald on October 26.
In recent years, the discussion on the tightening of foreign investment in the United States has long been under discussion and this trend has become even more pronounced since this year. In September, the U.S. government stopped the Chinese-backed private equity fund Canyon Bridge ) Acquisition of US Semiconductor Manufacturer Lattice Deal, the news release, 21st Century Business Herald reporter received a number of international law firm's comments on the incident, the legal advisers have said that the uncertainty of the United States is monitoring the rise In addition, 21st Century Business Herald recently discovered in some open discussions on cross - border mergers and acquisitions that the insiders are also worried about this issue.
At the end of last year, China tightened the regulation of foreign investment, but there have been some signs of easing in the near future. On the contrary, it is the regulation of the United States (there are signs of tightening), especially the discussion on the tightening of CFIUS (U.S. Foreign Investment Commission) More. "An international law firm partner told 21st Century Business Herald.
Trend: CFIUS Review Unpredictability Significantly Increases Sensitive Area Expansion
CFIUS is the Foreign Investment Commission of the United States. It is an inter-departmental organization of the U.S. Department of the Treasury, the Department of Defense, and other departments. It examines whether a foreign-funded M & A deal that constitutes foreign control of U.S. companies leads to potential national security risk.
CFIUS review is a voluntary reporting system. Generally speaking, CFIUS will confirm the materials within 5 days after filing the application and complete the review period. In the first stage, 30 days, more than half of the cases will be approved. In the 45-day review phase of Phase 2, some of the cases that failed to pass were required to submit remedial measures, and after this phase, CFIUS basically completed the review of 99% of the cases. In general, remedies submitted at the notifying party While it may be possible but not within the statutory deadline, CFIUS will agree to withdraw and resubmit the filing but will review the 75-day review deadline.
In the case of Lattice, after the two parties announced the deal in November 2016, CFIUS failed to make any progress after a eight-month review.
According to a statement released in September by International Law Firm Friedrich, the unpredictability of the CFIUS review process in terms of censorship and review results has increased significantly, with CFIUS up to a maximum of six weeks in the past year to verify that the filing is complete and, within 30 days Only 20% of cases were approved during the first instance, which means CFIUS routinely conducts more scrutiny of cases with relatively less impact; it also claims more deals will be submitted to the U.S. president unless the claimant agrees to withdraw and re-declare it.
'The CFIUS review is voluntary, and if you declare it without filing it, once it is found, it will be reinstated and reviewed, even if the transaction is completed.' 'In general, there is no problem in the first phase after 30 days The second phase of 45 days is a stage of investigation, the buyer and the seller will go through the lawyers and CFIUS communication, to understand what CFIUS concerns, but this is often no template to follow, and the need for specific analysis of concrete conditions, and then make the appropriate mediation program. Said that foreign investment targets a real estate in the United States, but a military base within 75 miles of the subject mark or a subsidiary of the subject company is a semiconductor company. Foreign investors will then need to take remedial measures such as divesting sensitive assets, Weakened our control rights and agreed to undergo continuous monitoring by independent third parties after the delivery of the project, etc. What is happening now is that in some cases, CFIUS has taken the initiative to withdraw the claimant for some reasons, submit the supplementary documents before submitting the application, Re-enter the review for the Chinese buyer, the first stage before the pass is a high probability event, but there have been significant changes, especially when you have a government Capital background, it can be said that the second phase is almost a nail board. 'US rich law firm partner Sun Chuan October 25 in an interview with 21st Century Business Herald said.
In addition to making the review process more unpredictable, the sensitive areas of inward investment are expanding further. 'Previously, the most critical infrastructure and export-restricted technologies were extended to areas involving a wide range of personal information, including health insurance, payments, etc., Regulation of foreign investment is indeed a closely regulated trend, but not only for China but for the overall tightening of foreign investment, Lian Lian said.
The CFIUS annual report for 2015, released in September, also said that deals involving holdings or access to personal or business-sensitive data in the United States are subject to close scrutiny by the organization, according to which the sectors that may hold the aforementioned data include insurance, Medical services and technology services, which have never been mentioned in previous annual reports.
"Semiconductor companies have always been sensitive targets. Recently, some data-related targets have also become sensitive.For example, the acquisition of the subject of the bank or insurance company, which often involves a lot of personal information; there is GPS information, such as driverless Of the subject, the above subject more or less subject to the CFIUS review. 'Sun Chuan said.
'In fact, most Chinese investment in the United States M & A, CFIUS are unconditionally approved, but sensitive areas, will face the case of failing to pass or conditional, at this time, the more important point is to be prepared in advance On the whole, there are still some uncertainties in the bilateral relations between China and the United States. As the internal protectionism in the United States has become increasingly powerful and the Trump administration has taken power, CFIUS is in a situation of internal manpower shortage. In order to raise the uncertainty of the examination results, the examination time will be relatively long, and it is suggested that China should make the relevant psychological preparations. "Even Lian said.
In addition to macro-protectionist tendencies, problems within the CFIUS are also a contributing factor.
'It is a regrettable change that CFIUS currently lacks veteran government officials to review the work of committee agencies and make difficult decisions when needed, and sometimes risks are identified if the companies involved in the transaction are able to respond flexibly May ease, the transaction can continue, but career-minded officials hard to make such a difficult decision.In addition, the annual submission of CFIUS review cases continue to increase, but the US Department of Treasury resources Has not kept up. "Miriam Sapiro, Finsbury's partner in communications consultancy Finsbury, wrote in a written statement on 21st Century Business Intelligence on October 27th that Sapiro was a deputy trade representative of the Obama administration and a CFIUS committee member.
CFIUS is scheduled to release its 2015 annual report for the first quarter of 2016, but delayed the release of the report until September of this year, and the analysis attributed this to the vacancy of senior officials within the organization.
Although this report presents the situation in FY2015, it reflects the trend in recent years as well. In particular, the number of CFIUS filings has increased significantly in FY2015, while the transaction in the second stage, that is, the investigation phase, has been significantly increased and the withdrawal of applications also increased slightly , The proportion of transaction filings involving Chinese-controlled transactions increased, the proportion of filings related to semiconductor products increased, and most of the filings involved major U.S. technology companies.
Strategy: Evaluate the appropriate solution to the CFIUS Risk Plan as soon as possible
In response to the tightening of US regulation, industry insiders suggest that if it involves sensitive areas, it is necessary to fully assess the risks as soon as possible and plan corresponding solutions.
'In the United States regulatory, we recommend that customers do not need to worry too much, to distinguish the specific projects of the industry, business, technology to approve the possibility of specific projects may not approve the risk of approval.Semiconductor is indeed a sensitive area, whether Obama stopped the love Struggling (December 2016, the Obama administration pressured China Fujian Hongxin Investment Fund to acquire Alzheimer's, a German manufacturer of semiconductor devices) or Lattice, which Trump halted, and China interested in U.S. projects if The project has sensitive business or technology, first of all to do due diligence, to fully understand the situation.Next, to find a good solution, in many cases, CFIUS will not be a one-sided rejection of the transaction, buyers and sellers have the opportunity to joint They submit the solution, "Lian Lian said.
Sun Chuan suggested that evaluation and response to the risk of CFIUS review should be initiated as soon as possible. 'Relevant experts should be invited to conduct an early analysis on the subject matter of the investment, including the portfolio of assets and intellectual property portfolio, whether the trading structure is a holding or an overall acquisition or a minority Equity control, or just acquiring assets, doing these analyzes as early as you can is actually saving you money because the last thing you want is trading to come to a critical stage and you suddenly find yourself facing CFIUS. "
'My advice to Chinese investors is to keep a bright eye on the investment environment and to know that if the transaction involves the issue of national security, especially of state-owned enterprises, it will face the dilemma of approval. In addition to worrying about the national security factor, Many U.S. lawmakers and government officials are even more worried about the corresponding market access problems in China.A recent U.S. legislation has stipulated that if transactions involving foreign state-owned enterprises exceed 50 million U.S. dollars and all other transactions exceeding 1 billion U.S. dollars, U.S. Secretary of Commerce has the right to assess their economic impact, "suggested Sapiro.
'At present, it does bring some challenges to those who do our practical work, but I have not seen a cliff-like decline. In the medium and long term, it is a general trend that China and the United States should strengthen economic exchanges. The United States is a key investor in the world's investors. The long-standing interest of the Chinese and the Chinese investors in the U.S. bid, I am still very optimistic about China's investment in the United States, "Lian Lian said.