Online Extra: How to Buy a U.S. Company
Memo to: Global CEOs
Re: U.S. acquisitions
So you're planning to buy an American company. Well, as we've seen from all the fuss over the Dubai Ports World's bid to operate six U.S. ports, the political climate in Washington can be pretty chilly these days. But there are ways to steer your acquisition through the Committee on Foreign Investment in the United States (CFIUS), that supersecret interagency task force that has to sign off on all these deals. Here's some blunt advice from experts who have successfully navigated the process:
Engage early. Contact CFIUS's staff at the U.S. Treasury well before you officially file for approval, preferably before you announce your deal. "It shows you're respectful of the process," says David M. Marchick of law firm Covington & Burling.
Establish your security credentials. All corporate buyers must show that they are serious about security, whether it's protecting U.S. information technology, preventing technology transfers, or guarding the U.S. homeland -- the hottest button of all. Concerns multiply if your company has ties to a foreign government or is based in a country considered a security risk. Dubai Ports hit the trifecta.
Negotiate security agreements. Most transactions nowadays require some security commitments from the purchaser. If it's a telecom deal, for example, CFIUS is likely to require that buyers submit to data searches by the CIA and FBI, that they store data in the U.S., and that American citizens hold key jobs.
Embrace the extra 45-day review. It's not always the best strategy to breeze through the hush-hush 30-day review. The Dubai Ports backlash indicates that many Americans view the short review as a rush to judgment. Let the government agencies know you have nothing to hide. That is, if you have nothing to hide.
Do opposition research on yourself. Scour your records and relationships to uncover your vulnerabilities, particularly on security. Be prepared for losing bidders or estranged business partners to throw monkey wrenches into the process, usually by stirring xenophobia on Capitol Hill.
Address Congress' fears before they blow up. Go out of your way to explain your deal to key members of Congress. Consider a PR campaign to preempt potential problems before they take on a life of their own.
Hire one of Washington's few CFIUS experts. A small band of legal wonks specializes in guiding companies through these sensitive international deals. Among the big names: Covington & Burling's Marchick, Christopher R. Wall of Pillsbury Winthrop Shaw Pittman, Joseph F. Dennin of McKenna Long & Aldridge, and Ivan Schlager of Skadden, Arps, Slate, Meagher & Flom.
Think twice before hiring a big-name lobbyist. Many foreign companies believe they can influence CFIUS by hiring a prominent politico or friend of the President. But these stars can bring bad publicity as well as cachet. "This is national security," says Stephen J. Canner, vice-president of investment and financial services at the U.S. Council for International Business and former staff director of CFIUS. "There shouldn't be any lobbying from the outside."
Keep abreast of the rules. In the wake of the ports brouhaha, some key lawmakers, including Senate Banking Committee Chairman Richard Shelby (R-Ala.) and House Homeland Security Chairman Peter T. King (R-N.Y.), are suggesting changes in the CFIUS review process. Make sure you're up to date on the law. Don't relive the last battle. Prepare for the next one.