Washington insiders gave Chinese acquirers leg up
In the wake of the latest figures on China M&A deals from the Committee on Foreign Investment in the United States (CFIUS), Reuters reports that a bunch of Washington insiders are doing a roaring business advising Chinese companies on how to get cross-border deals approved by the US government.
Many members of this small group include former US officials who left government, even former officials of CFIUS, to become lawyers, consultants and lobbyists.
In just the first two months of 2016, Chinese acquirers have announced 22 deals in the US, worth a combined $23 billion, according to Thomson Reuters data. That is a massive increase over 2015, which saw 88 deals worth $13 billion, and 88 deals for $7 billion in 2014.
Recently proposed Chinese takeovers of US companies include the Chicago Stock Exchange and several producers of high-end semiconductors. All these must go through CFIUS, which scrutinizes deals for national security concerns. This interagency panel is comprised of 16 US government departments or agencies and chaired by the Treasury. It does not publish its decisions or its reasoning for them. Advisers say inside knowledge and connections are important to navigate what outsiders often see as a “black-box” review process.
Reuters said the list of former officials who use their CFIUS experience in advisory work includes:
Anne Salladin, who reviewed about 500 deals that went to CFIUS during her 20 years at the US Treasury. She now works for law firm Stroock & Stroock & Lavan LLP where she has advised a Chinese private equity firm on the acquisition of some semiconductor-related assets.
Nova Daly, now at law firm Wiley Rein LLP, is a former US Treasury deputy assistant secretary for investment security and policy. She advised US hard-disk maker Western Digital on a proposed investment by China’s Unisplendour. That deal was abandoned this week amid CFIUS concerns.
Stewart Baker, now with law firm Steptoe & Johnson LLP, is a former Department of Homeland Security assistant secretary for policy. He worked on the 2014 acquisition of Motorola Mobility by Lenovo Group, a Chinese PC and smartphone maker.
All three of the former officials and Whitney Smith, a Treasury spokesperson declined to comment to Reuters.
Sometimes, CFIUS advisors are hired to lobby against a deal by corporate competitors. Mario Mancuso, a partner at law firm Kirkland & Ellis LLP who formerly sat on CFIUS as undersecretary of commerce for industry and security, now typically advises such companies.
A CFIUS review typically lasts between one and three months and can cost from as little as $50,000 to as much as $1 million for more complicated or controversial transactions, according to a CFIUS expert who spoke to Reuters.
All these CFIUS reviews have created a cottage industry with many participants. Law firms such as Skadden, Arps, Slate, Meagher & Flom LLP and Covington & Burling use their relationships with CFIUS officials to offer insight into how CFIUS will view a deal.
Lobbying firms, such as Podesta Group and BGR Group, both boast CFIUS experts on their websites. Their job is to persuade lawmakers and US officials that a transaction is not threatening
Management consulting firms, such as Accenture and Deloitte Touche Tohmatsu offer to help companies address national security risks identified by CFIUS.