The Financial Times is reporting that the Pentagon has asked for – and is likely to get – a requirement passed into law that any acquisitions over $100m of U.S. companies by foreign companies must first be reviewed and approved by the Committee on Foreign Investment in the U.S.
The CFIUS (doesn’t anyone have a good acronym anymore?) was established in 1975, but really came into effect under “41“ (aka George H.W. Bush) in 1988. Now “43“ is trying to expand their oversight authority – with the result being that just about any foreign acquisition will necessarily slow down. This is exactly what the U.S. complained about when the E.U. torched the G.E./Honeywell acquisition last year. Do as I say, not as I do, eh George? (Interestingly, the CFIUS is who slowed the NTT acquisition of Verio two years ago to a crawl – requiring NTT to extend their acquisition bid six times before finally getting approval. The problem? The FBI was worried that a foreign ISP would be less likely to cave to requests for info. You think?) Today, the CFIUS reviews less than 10% of potential acquisitions. Under the proposed rule, it would most certainly increase.
Most frustrating – by not having any controlling rules over what the criteria are for review, the process will be fraught with uncertainty and confusion. And for companies seeking liquidity in an IPO-unfriendly world, this will most certainly be a hard pill to swallow. Wonder if those valley execs who ponied up a bunch of dough for “Dubya” are all that thrilled now?
Memo to the White House: get those pollsters working on trying to spin this one.