Page 62 - The CFIUS Book

THE CFIUS BOOK
l The development of and implementation of certain security policies including, for example, export control policies
l Annual meetings with a CFIUS agency l Annual independent compliance audits
3.5.2. Mitigation agreement strategy
Complying with an LOA can be an expensive undertaking for a foreign buyer. However, that expense is often outweighed by the foreign buyer’s desire to own the business or activity subject to the mitigation agreement. If it is not, parties may alternatively seek to carve out the troublesome asset, or otherwise restructure the acquisition to avoid the acquisition of a part of the business posing national security risks, if that is a viable option. They could, for example, restructure to acquire only certain divisions or product lines, rather than the entire business.
Negotiation of mitigation agreements requires deft counsel and careful, coordinated strategy. Ideally, counsel for the parties should identify potential mitigation measures to CFIUS early in the process, before the Committee hardens in a position that would require more restrictive measures (but not too early! In in some cases, it is possible to explain to CFIUS that there are no security risks presented by a transaction and walk the transaction back from mitigation).
CFIUS does not operate as a singular
actor. For this reason, although
negotiations will be may be led by one
agency, the draft LOA is thereafter
brought back to the full Committee
(and to the Treasury Department’s
Office of General Counsel) for
approval. The same is true of
proposed revisions to a draft LOA.
Generally, this occurs toward the end of the CFIUS process, often in the waning days of the 45 day investigation period. When proposing revisions, effective counsel should focus on the most important provisions to the parties rather than attempting wholesale redrafting of agreements. Such attempts to rewrite agreements (or propose too many changes, or changes without adequate explanation) often result delay, as the Committee may suggest a “pull and refile” to permit it additional time to review such changes – thus prolonging the review process.
FOCuSED NEgOTIATION OF THE KEy mITIgaTIOn agrEEmEnT TErmS may HElp avOId wHOlESalE rEdraFTS THaT COUld rESUlT In THE ExTEndEd CFIUS rEvIEw pErIOdS Or a SUggESTIOn THaT applICanTS “pUll and rEFIlE.”
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