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By Yin Wilczek
Companies involved in a merger or acquisition that raises national security issues should quickly hire experienced counsel to help them with possible review by the Committee on Foreign Investment in the U.S., Terex Corp. Vice President and Deputy General Counsel Scott Posner said.
Although in-house attorneys know their companies best, outside counsel familiar with CFIUS’s processes “can help you avoid some of the landmines,” Posner told Bloomberg Law. “And the earlier you engage them, the better off you’re going to be.”
CFIUS is an interagency panel headed by the Treasury Department that probes the acquisitions of U.S. businesses that pose national security risks. Companies voluntarily notify CFIUS of a transaction, but if they don’t do so, the committee can initiate its own review and impose changes. CFIUS is on track to scrutinize a record number of deals this year, and currently has a backlog of cases.
Several deals involving Chinese buyers have stalled—including Ant Financial’s bid for Dallas-based MoneyGram International Inc.—or been abandoned after encountering CFIUS objections. In September, President Donald Trump blocked the acquisition of Lattice Semiconductor Corp. by a Chinese-backed private equity fund based on the committee’s recommendation.
Posner’s responsibilities at Terex, a global manufacturer of cranes and other construction equipment based in Westport, Conn., include mergers and acquisitions. He spoke to Bloomberg Law Oct. 17 on the sidelines of the Association of Corporate Counsel’s annual meeting in Washington.
In 2016, CFIUS approved Finland-based Konecranes Plc’s proposal to buy Terex’s materials handling business.
Terex last year also was targeted in a $3.4 billion takeover attempt by Chinese company Zoomlion Heavy Industry Science and Technology Co. Concerns were raised that CFIUS would be a stumbling block because Terex has government contracts. Zoomlion ultimately dropped its bid because the parties couldn’t agree on crucial terms.
Posner added that in-house counsel should keep their boards and key stakeholders informed while dealing with CFIUS, especially if their transaction is one that may trigger deeper scrutiny. “You want to be thinking down the road.” Chinese acquirers or deals involving sensitive technology are obvious red flags, he said.
Bipartisan bills pending in Congress would extend CFIUS’s jurisdiction and lengthen its review timelines.
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