CFIUS 2020 data
CFIUS said in its latest annual report to Congress at the end of July that is now takes an average of 45 business days to review proposed acquisitions of US companies by foreign investors.
It takes an average of another 86 business days if the transaction moves into an investigation phase.
The latest report covers calendar year 2020.
The likelihood that an acquisition would be rejected increased significantly during the Trump years.
Chinese companies were still investing in US companies during 2020. However, Chinese filings were down compared to past years. Only 17 filings were made by Chinese companies in 2020 — 20 if Hong Kong is counted — compared to 55 in 2018 and 25 in 2019.
CFIUS stands for the Committee on Foreign Investment in the United States, an interagency committee of 16 federal agencies, headed by the Treasury Department, that reviews potential foreign acquisitions for national security implications. The committee reports annually to Congress.
Filing of transactions with CFIUS used to be voluntary. Filings are made only in a fraction of acquisitions. The danger of not filing is that the government could force the transaction to be unwound later if it has national security concerns. However, some filings are now mandatory after a recent change in the statute. (For more detail, see “Scrutiny For Inbound US Investments” in the October 2019 NewsWire and “Expanded Reviews of US Inbound Investments” in the February 2020 NewsWire.)
Most transactions that raise problems are voluntarily withdrawn. Many are later resubmitted on revised terms. In some cases, transactions are approved after the acquirer agrees to mitigation measures.
The committee makes recommendations. The president has ultimate authority to block a transaction. Presidential action to block a transaction is rare.
The number of mandatory filings increased dramatically during the period 2018 through 2020. These filings are made on short-form declarations.
They are required in two situations.
One is where a foreign government acquires a substantial interest in a US company that handles critical technologies, critical infrastructure or sensitive data.
The other is where a foreigner acquires an interest in a business that makes critical technologies for use in any one of 27 specific industries. The industries include nuclear power generation and manufacturing transformers, turbines or batteries.
The number of mandatory filings was 20 in 2018, 94 in 2019 and 126 in 2020.
The largest single category of such filings in 2020 was for investments in US power companies. There were 13 such filings in 2020. The next largest category of mandatory filings was for companies engaged in computer design (11).
The top six sources of mandatory filings were by investors from Canada (20), Japan (18), the United Kingdom (12), Germany (10), Sweden (7) and China (6, counting one from Hong Kong).
No short-form declarations were rejected in 2020. It took CFIUS on average 30 business days to process such a declaration.
Full filings and investigations of proposed deals spiked during the first two years of the Trump administration and then fell in 2019 and 2020, approaching a more normal pattern. A full filing is most likely to be made in cases where a foreign company is investing in a project near a US military base or other sensitive government installation.
Still, the odds of having a deal rejected was significant during all four Trump years.
There were 187 full filings in 2020. Eighty eight moved past review to an investigation phase. One deal was rejected during the initial review. Another 28 were withdrawn during or after the investigation.
During the last six years of the Obama administration — 2011 through 2016 — roughly 42% of filings led to investigations. The figure jumped to 72% in the first year of the Trump administration in 2017. It was 69% in 2018, 49% in 2019 and 47% in 2020.
The likelihood that a deal would be withdrawn also increased during the Trump years. It was 21% during the Obama years. It increased to 36% on average during Trump. These are percentages of deals that moved to an investigation phase. Withdrawn deals as a percentage of total filings were 8.9% under Obama and 21.7% — more than one in five — under Trump.
Six of the withdrawn deals in 2020 were refiled in 2021.
Of the full filings in 2020, 11% were in the power sector.
The top seven countries whose investors made long filings were China (20, including three from Hong Kong), Japan (19), the UK (14), France (11), and Australia, Sweden and Singapore (10 each).
CFIUS was tipped off by news reports or tips from federal agencies, the public or members of Congress in 117 cases during 2020 and asked the parties in 17 of the cases to file.