China On Top: China Dominates CFIUS Reviews for Third Year in a Row
The Committee on Foreign Investment in the United States (“CFIUS”) just released its Annual Report to Congress for 2014, the most recent year for which data is available. There were a total of 147 cases reviewed by CFIUS in 2014. This is the greatest number of reviewed transactions since the 2008 financial crisis. For the third year in a row, Chinese transactions accounted for the greatest number of CFIUS reviews (23 in 2012; 21 in 2013 and 24 in 2014). Asia and Europe accounted for roughly 38% and 41% of reviews, respectively. The Report also makes clear that cases continue to get a hard shake. One-third of the reviews went to full investigation, with CFIUS imposing mitigation in 9 cases. Twelve notices were withdrawn in 2014, only one of which was re-filed (in 2015), indicating a high number of troubled deals. Finally, the Report reveals that CFIUS reviewed 4 real estate transactions, continuing a trend first listed in the Annual Report in 2012. For additional information on CFIUS and real estate transactions, please see our recent alert on the subject: “What Real Estate Cos. Need To Know About CFIUS Reviews”.
Our more in-depth analysis of this Report is forthcoming. Overall, CFIUS continues to approve the vast majority of transactions it reviews, but deals can require restructuring or mitigation to pass muster. Post-closing reviews present particularly difficult challenges – and can sometimes require unwinding. Acquirers – especially those from China and other countries that lack strong defense ties to the United States – are therefore strongly urged to consider at an early stage whether a pending transaction merits CFIUS filing. Increasingly, this will include businesses with real estate assets.