Considerations for In-House Counsel in Navigating CFIUS Issues in Cross-Border Transactions

Paul Giordano, Former General Counsel, Ironshore Inc.

Internal lawyers play a unique role in transactions involving the acquisition of a business, for both acquirers and targets. Frequently, internal lawyers are involved in the early stages of a transaction before outside lawyers or other advisors are engaged. In-house lawyers advise boards of directors and management on key legal and regulatory issues, due diligence considerations and the potential impact of one or more of such factors on transaction structure, deal terms and valuation. Before entering into exclusive negotiations, many sellers often insist on seeing a non-binding letter of intent setting forth a potential buyer’s valuation, transaction structure, key conditions and even proposed contract language. U.S. national security issues reviewable by the Committee on Foreign Investment in the United States CFIUS can affect not only key terms of a transaction but also the willingness of buyers and sellers to transact with each other in light of the closing uncertainty to which a CFIUS review may give rise. Internal lawyers are frequently generalists or specialists in areas of law closely linked to their industries and understandably lack expertise in U.S. national security matters and the CFIUS process. As unfamiliar and challenging as such matters can be for American lawyers, they can be even more vexing for non-U.S. lawyers.