There is no doubt China deals have been more difficult to clear during the Trump years than they were previously. A database maintained by KWM shows a clearance rate of over 95% during the final years of the Obama Administration. By contrast, the overall clearance rate since Donald Trump took office in January 2017 is no better than 60%.
Our database of China deals during the Trump Administration covers 66 transactions. Of course, all filings are confidential, and many transactions completed without making a CFIUS filing. Where a filing is voluntary, the parties may choose not to file; there is no fine or penalty for choosing not to make a voluntary filing. However, if the parties do not file, CFIUS can come back at any time and review the transaction, even after it has closed. If it cannot satisfy all its national security concerns at that time, CFIUS can require the foreign party to divest. This has happened three times in the past year (Beijing Kunlun’s acquisition of the social media website Grindr, iCarbonX’s acquisition of PatientsLikeMe, and Beijing Shiji Information Technology’s acquisition of StayNTouch, all of which involved sensitive personal data and geolocation concerns).
The largest single category of transactions in our database is technology (29 transactions, including 9 in the semiconductor space). These deals cleared at a rate of almost 60%, better odds than most people would expect. Other sectors—financial services, life sciences, real estate—cleared at comparable rates. These rates have stayed essentially unchanged since the beginning of the Trump Administration, indicating that, although these deals are difficult, they are not getting more difficult.
Acquisitions outside of the technology, financial services and media categories cleared at a rate almost as high as Chinese investors enjoyed under Obama. Our database includes 14 transactions in a miscellaneous category, including aviation, battery technology, textiles, gaskets and other parts, transportation, manufacturing, airbags and automotive parts, and natural resources. These deals cleared at a rate of over 80%.
The 60-second takeaway is that technology deals are difficult but still possible, and the clearance rate in other sectors—where there are many assets—is still high.
Coming next: Structuring to avoid a filing requirement
(The figures in this post should be taken as indicative only, since CFIUS does not release information about specific deals submitted to it and our information is based on public reports and industry knowledge.)