CFIUS publishes an annual report, of which there is a classified and an unclassified version. If you look at the last five or six public reports, they give summary statistics about the origin of the acquirers in these transactions that come before CFIUS. As recently as 2009, there were four deals – out of a total of 65 – where the acquirer was Chinese. By 2015, 29 of 74 deals on the CFIUS docket involved Chinese acquirers. If once you had transactions coming mostly from the UK, Canada and France, and now you have a larger number coming from China, it is not surprising that a committee
concerned with national security is going to arrive at a slightly different place. The kinds of assets and companies being purchased have also evolved. Transactions involving dual-use technologies or artificial intelligence or semiconductors or big sets of personal data are more frequent than they were ten years ago or even five years ago. And those transactions have tended to raise greater national security sensitivity. If CFIUS determines there is no national security concern, then the transaction can proceed. If, on the other hand, CFIUS decides there are national security concerns, they are obliged under the statute to try to mitigate those concerns, which is to say to
work to address them. Sometimes that will take the form of leaving certain assets out of the deal. Other times, there will be changes to post-transaction governance, or a set of protections concerning who has access to what information or what intellectual property or which data. There can be a substantial middle space between deals that have no national security issue at all and those that seem so incontrovertibly problematic that the government says, “We don’t ever imagine getting to yes.”
Under the statutory provisions that govern CFIUS, the only person who can actually block or undo a deal is the US President. What ends up happening with some frequency is that when CFIUS views itself as having a national security problem that cannot be mitigated, it will communicate to the parties that it will recommend to the President that he block the transaction. Most parties in that circumstance will pull their deal from CFIUS and not proceed with the transaction because they prefer to avoid the President publicly blocking the transaction with an explanation as to why he has concluded that there are unmitigable national security issues. There are some deals that get “blocked” this way on a defacto basis without actually going to the President.
If the parties pull out of their deal, the government will not make that public, so it becomes public only if one of the parties decides to disclose what has happened. There are a fair number of deals that do not go forward under the circumstances I have described, but only some portion of those will become publicly known.
Under President Trump, I do not think there has been a 90-degree or 180-degree turn in the way the current CFIUS views transactions. I think there has been further development of the idea that transactions that originate in certain geographies or that involve certain kinds of technology will be scrutinized very carefully. Those perspectives began during the Obama Administration. For example, the Obama Commerce Department put out a report in 2016 saying the US government was quite concerned about the extent to which the Chinese government was focused on closing the gap relative to the US in their basic set of capabilities around semiconductors, essentially saying the US ought to be more protective of its technology and manufacturing advantage in semiconductors, which can be relevant to national security. This line of thinking has to some extent further intensified, in terms of the range of sensitive technologies and capabilities that give the US pause. But it is not a sea change. It is more of a movement further down that path.