Mergers and acquisitions may not be completed for numerous reasons. In this Deal Note® and given the continuous global conflict, we discuss how diligently researching a potential buyer can avoid the loss of time and money. As middle-market Aerospace and Defense (“A&D”) M&A Bankers, Alderman & Company does not serve as legal counsel and is not providing legal advice; this Deal Note® is provided for educational purposes only.
In 1975, the Committee on Foreign Investment in the United States (“CFIUS”) was established by President Gerald Ford’s Executive Order 11858. Then, the Foreign Investment and National Security Act of 2007 replaced the Executive Order and codified CFIUS.
CFIUS is a U.S. government inter-agency committee that reviews and assesses the national security implications of foreign investments and acquisitions in U.S. companies or operations. CFIUS operates under the jurisdiction of the U.S. Department of the Treasury.
A&D transactions naturally attract CFIUS scrutiny more than most other industries due to the sensitivity of national security – even commercial aviation companies can fall under strict scrutiny if their underlying technology or products could have military applications. When a foreign buyer, or investor, is deemed a potential national security risk, CFIUS has the authority to recommend that the President of the United States block or modify the transaction.
CFIUS filings are broken into two categories: Declarations and Notices. The type of filing will determine the review period, whether a filing fee is to be paid, and the level of detail required in the filing. CFIUS has the authority to change the filing requirement for a transaction if it deems it appropriate.
Alderman & Company has seen deals in the past fall through due to legal counsel advising that CFIUS would block the acquisition. Therefore, we recommend extensive research on potential buyers before progressing with them in the sale process and staffing your team with seasoned M&A legal counsel and even third-party consultants. CFIUS is critical to A&D middle-market M&A and the national security of the U.S.
Have a great day everyone.
Ryan Kirby
Vice President
