Keep Your Investors Close, but CFIUS Closer: Highlights from the CFIUS Annual Report and Other Developments in Washington

Key Takeaways

• On July 31, 2023, the U.S. Department of the Treasury (“Treasury”) published the Committee on Foreign Investment in the United States’ (“CFIUS” or the “Committee”) Annual Report to Congress on key activities, including notices, declarations, and withdrawals through 2022 (“Annual Report”). 
• The Annual Report and other guidance issued by the Committee in recent months hold important insights for dealmakers contemplating participation by non-U.S. investors in investments in U.S. businesses.
• The publication of the Annual Report also caps off what has been a “hot” year for the Committee. Fresh off a year in which CFIUS reviewed a record 440 covered transactions, there have been a dizzying number of developments that impact private equity, real estate, and venture capital transactions. There are developments adjacent to CFIUS worth monitoring as well, including proposed legislation intended to protect American farmland from foreign ownership and a potential outbound investment review mechanism, which may be announced as soon as this week.
• The trendlines remain clear – the U.S. government remains focused on managing the impact of foreign investments on U.S. national security. As compared to prior years, the Annual Report demonstrates that fewer transactions received clearance on initial review and more required national security agreements in 2022 than in prior years. In addition, more transactions are being abandoned by parties after they are unable to agree to mitigation measures with CFIUS. In light of these and other developments, dealmakers would be wise to evaluate CFIUS risks at the start of the transaction process and develop a sophisticated strategy to navigate the current headwinds. We can help.