How Does a Foreign Direct Investment M&A Attorney Help?

The legal issues depend on the buyer, target, industry, assets, and transaction structure. A foreign acquisition involving sensitive technology or data, for example, may require regulatory analysis beyond the commercial due diligence ordinarily conducted in an acquisition.

Not every foreign acquisition requires a mandatory CFIUS filing. Mandatory declarations apply to certain covered transactions involving specified critical-technology U.S. .usinesses and to certain transactions in which a foreign government acquires a substantial interest in specified U.S. .usinesses.

Parties should therefore evaluate the target's activities, investor ownership structure, foreign-government interests, and relevant export-control classifications before determining whether a mandatory filing applies.

A short-form declaration generally has a 30-day assessment period. A formal notice proceeds through an initial review period of up to 45 days and may be followed by an investigation of up to another 45 days. In extraordinary circumstances, the investigation period may be extended by 15 days.

Foreign buyers may need to assess sanctions administered by the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) and export-control requirements administered by the Department of Commerce's Bureau of Industry and Security (BIS).

If a target handles controlled technology, technical data, defense articles, or related services, additional analysis under the Export Administration Regulations (EAR) or International Traffic in Arms Regulations (ITAR) may be necessary depending on the business and transaction.

Cross-border acquisitions can raise federal and state tax questions as well as treaty, withholding, and transfer-pricing considerations. The appropriate tax structure depends on the entities, assets, jurisdictions, and financing involved.

Due diligence should also examine material intellectual property rights, licensing arrangements, privacy obligations, and international data transfers where relevant. Privacy requirements such as the GDPR or California privacy law apply only when their respective jurisdictional requirements are satisfied, rather than automatically to every foreign acquisition.

An equity acquisition generally transfers ownership of the target entity while the entity continues to hold its existing assets, contracts, and liabilities. The transaction can nevertheless trigger change-of-control provisions, regulatory approvals, or contractual consent requirements.

An asset acquisition allows the parties to identify the assets and liabilities to be transferred. However, excluded liabilities do not necessarily eliminate all successor-liability risks, and individual assets, licenses, contracts, or permits may require separate transfer procedures or consents.

Acquisition agreements use representations and warranties, covenants, closing conditions, and indemnification provisions to allocate identified transaction risks. Depending on the deal, parties may also negotiate escrows, holdbacks, liability caps, and representations and warranties insurance (RWI).

RWI can transfer certain covered risks to an insurer, but coverage is subject to the policy's exclusions, retention, limits, underwriting, and other terms. It should not be treated as guaranteed recovery for every breach.

A foreign investor acquiring a New York business does not automatically become subject to every New York registration requirement merely because it completes an acquisition. Whether a foreign entity must obtain authority to conduct business in New York depends on its post-closing activities, entity structure, and applicable New York law.

Transactions involving New York real property require separate tax analysis. New York State Real Estate Transfer Tax can apply to transfers or acquisitions of a controlling interest in an entity holding New York real property.

New York City also imposes Real Property Transfer Tax on qualifying transfers of real property or controlling economic interests in entities owning or leasing real property in the city. The application of these taxes depends on the particular transaction, consideration, ownership changes, and available exemptions.

When CFIUS identifies a national security concern, potential outcomes can include mitigation measures designed to address the identified risk. The scope of those measures depends on the transaction and the particular national security concerns involved.

Cross-border M&A agreements should address responsibility for regulatory filings, cooperation with government inquiries, allocation of filing risks, termination rights, and the consequences of delayed or unsuccessful regulatory clearance.

Aligning these provisions with due diligence findings can help reduce uncertainty between signing and closing.