National Security Foreign Investment Reform and Strengthened Transparency Act of 2007

To Our Clients and Friends:

The Committee on Foreign Investment in the United States ("CFIUS") emerged from obscurity in recent years as a result of the controversy over attempted United States acquisitions by CNOOC and Dubai Ports.  CFIUS is the governmental body responsible for reviewing foreign investment in the United States from a national security viewpoint.  Formed in 1975, it remained largely unnoted until the recent controversy surrounding proposed acquisitions by acquirors in which foreign governments held a substantial stake.  The fallout from that controversy is now taking shape in the form of legislation that may have an impact not only on foreign acquirors but also on private equity and corporate dispositions. 

The nuts and bolts of the changes can be viewed here and will doubtless be subject to change as the Senate and Administration weigh in before any changes become law.  For now, it is worth noting that the version approved by the House would make the review process longer for acquirors controlled by foreign-governments (from 30 days currently to 45), would mandate Presidential approval of deals involving any person or company on a government watch list, would broaden the definition of national security, subjecting more potential deals to review, would change the panel's composition and increase its power to negotiate concessions from those subject to its review.

While potential foreign investors will quickly note the additional hurdles to completing deals, domestic sellers of assets should also monitor these legislative developments which have the potential to eliminate or discourage internationally-backed bidders, affect the seller's due diligence on all bidders and generate delays on closing deals with certain buyers. 

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