M&A Protecting National Interests

In Focus: Protecting National Interests in M&A Transactions

News, Wire

Who is CFIUS?

Much has been written and spoken about foreign companies with ties to communist governmental regimes acquiring US-based companies. This article discusses how the US government protects our country’s national security issues when M&A transactions are suspect.

Many may not know that there is a body within the U.S. government that is devoted to screening planned acquisitions of U.S. companies by foreign entities. The Committee on Foreign Investment in the U.S., or CFIUS, is a fourteen-member committee under the U.S. Department of Treasury that reviews transactions involving foreign investments in the United States in order to determine potential adverse effects on national security and other concerns.

The core members include the Attorney General, the US Trade Representative, the Director of the Office of Science and Technology, and the Secretaries of the Treasury, State, Defense, Homeland Security, Commerce, and Energy. There are also five White House offices that observe and can participate in CFIUS’ activities including the Office of Management & Budget, the Council of Economic Advisors, the National Security Council, the National Economic Council, and the Homeland Security Council.


CFIUS was founded in 1975 under President Gerald Ford to study foreign investment. Since then, CFIUS’ jurisdiction and powers have grown. In 2020, the Foreign Investment Risk Review Modernization Act (FIRRMA) took effect. This broadened CFIUS’ jurisdiction over certain non-controlling investments and certain real estate transactions located near U.S. military or government facilities. FIRRMA also relaxed rules by accepting Australia, Canada, and the UK as “excepted foreign states” due to their intelligence sharing system.

The Process

Filing for a review can be either voluntary or mandatory. CFIUS holds the right to review after a transaction, so foreign entities that are not required to file a review might want to in order to limit potential risk in the future. The passing of FIRRMA made filing requirements mandatory for transactions in the technology, infrastructure, and personal data spaces.

The process begins with the review of the deal and national security implications. If the transaction has potential to affect national security, it is investigated.  Actions resulting from the investigation can include mitigations or an entire block of the deal. Mitigation requirements can include any kind of alteration to the transaction that CFIUS imposes to reduce a national security risk. CFIUS can also recommend the President review and potentially suspend or block transactions. CFIUS has penalties for not following mitigation requirements which may include civil penalties up to the greater of $250,000 or the value of the transaction.


Investigations have increased, due to the growing interconnectedness of the world and increased geopolitical threats by countries such as China. In 2015, the number of mitigated and blocked deals started to rise, as shown in the table below.

Table 1. Volume of Transactions Screened by CFIUS, 2009-19
YearNotices ReviewedNumber of InvestigationMitigated DealsBlocked DealsPresidential Blockings

Source: CFIUS Annual Report to Congress for FY 2019.

Note: Data for 2020 is not available because CFIUS tends to release the prior year’s data anywhere between several months or a year and a half after the close of the year. (However, the target or acquirer of blocked or mitigated transactions are free to release the details of CFIUS’ investigation into their deal.)


Thanks to the freedom of the acquirer and target company to publish blocked deals involving them, we were able to review some deals that were blocked by CFIUS. As expected, the common themes in these deals are personal data protection, competition in emerging technology, and military security. Below is a handful of illustrative examples.

First, “StayNTouch” of Beijing Shiji Information Technology Co. is an example of technology that led CFIUS to have personal data protection concerns. In 2020, CFIUS forced Beijing Shiji to divest StayNTouch for this reason. Beijing Shiji provides software services to the hospitality, food service, retail, and entertainment industries. StayNTouch offers hotel management software to big names such as MGM Resorts and the Fontainebleau. CFIUS blocked this transaction given that Beijing Shiji would gain access to the personal data that StayNTouch has on the patrons at hotels using this software.

Second, the blocking by CFIUS of Broadcom’s planned $117Bn takeover of Qualcomm in 2018 is an example of protection of emerging technology. Broadcom, a Singapore based company, designs semiconductor infrastructure software solutions while Qualcomm, a U.S. based leader in the 5G space, develops and commercializes technology used in mobile devices and network equipment. 5G competition is intense, and an acquisition of Qualcomm could have caused the U.S. to lose its competitive position in this space.

A third example of protection in the emerging technology realm is the 2020 blocking of Ekso Bionics’ joint venture with Zhejiang Youchuang Venture Capital Investment Co. (ZYVC) and Shaoxing City Keqiao District Paradise Silicon Intelligent Robot Industrial Investment Partnership. The two foreign investors make investments in emerging technology while Ekso is involved in developing exoskeletons for the military and rehabilitation services. Exoskeletons are placed on a user’s body as an outer skeleton that can increase strength, reduce pain, and improve overall performance. Under the failed agreement, Ekso would license its manufacturing technology to the two companies. However, this was blocked due to Ekso’s past work with the US Defense Advanced Research Projects Agency (DARPA) which develops emerging technology for the military.

Fourth, national security concerns resulted in CFIUS’s block of the 2016 acquisition of Aixtron S.A. by Fujian Grand Chip Investment Fund (FGCIF), a Chinese investment firm. Aixtron provides semiconductors used in various end markets, including in U.S. and German missile systems. Although Aixtron is a German company, it has U.S. operations. Germany also decided to block this transaction.

Finally, in 2017, CFIUS blocked Canyon Bridge Capital Partners’ (CBCP) $1.3Bn bid to acquire Lattice Semiconductor Company. CBCP, a private equity firm, is owned by China Reform Fund Management Co. which was linked to China’s space program. Lattice is a developer of semiconductors that are used in communications, computing, industrial, and U.S. military operations. Investigations found that China’s central government was attempting to fund this deal.


CFIUS has an increasingly important role in protecting national interests in an increasingly volatile geopolitical environment.

Southeast Spotlight

We are wrapping up this issue of the M&A Wire by spotlighting closed mergers and acquisitions in the Carolinas, Georgia, Tennessee, and Florida over the last 6 months with transaction values of greater than $25MM.

Table 2. Recent Southeast M&A Transactions October 2020-April 2021
M&A Closed DateAcquirerGeographic Locations [Acquirer]Target/IssuerGeographic Locations [Seller]Business Description [Target]Total Transaction Value ($USD MM, Historical rate)Implied Enterprise Value/Revenues Implied Enterprise Value/EBITDA
04/14/2021Cresco Labs Inc. (CNSX:CL)FloridaBluma Wellness Inc. (CNSX:BWEL.U)FloridaBluma Wellness Inc., through its subsidiary, One Plant Florida, operates as a medical cannabis company in the State of Florida.$253.53-
04/14/2021AIP, LLCFlorida SEACOR Holdings Inc. (NYSE:CKH)FloridaSEACOR Holdings Inc. engages in transportation and logistics, risk management consultancy, and other businesses in the United States and internationally.$1,234.551.54x11.25x
04/13/2021Orbital Energy Group, Inc. (NasdaqCM:OEG)GeorgiaGibson Technical Services, Inc.GeorgiaGibson Technical Services, Inc. provides technology services and equipment for cable system operators and equipment manufacturers.$48.001.20x8.73x
04/06/2021Red White & Bloom Brands Inc. (CNSX:RWB)FloridaAcreage Florida, Inc.FloridaNature's Way Nursery of Miami, Inc. engages in the production of medical cannabis.$60.00 - - -
04/06/2021Elbit Systems of America, LLCFloridaSparton CorporationFlorida Sparton Corporation, together with its subsidiaries, provides design, development, and manufacturing services for electromechanical devices; and engineered products in electromechanical value stream worldwide.$380.00--
04/01/2021IQVIA Holdings Inc. (NYSE:IQV)North CarolinaQ2 Solutions LLCNorth Carolina Q2 Solutions LLC, a clinical trial laboratory services organization, provides bioanalytical, genomics, vaccines, flow cytometry, anatomic pathology, immunoassay, companion diagnostics, and central laboratory services.$760.00--
04/01/2021Instem plc (AIM:INS)North Carolinad-Wise Technologies, Inc.North Carolina d-Wise Technologies, Inc. provides software solutions and IT consulting services to healthcare and life sciences industry.$30.95--
04/01/2021Sunnova Energy CorporationFloridaSunstreet Energy Group, LLCFlorida Sunstreet Energy Group, LLC provides transmission and distribution of solar energy.$297.80--
03/31/2021Sangoma Technologies Corporation (TSXV:STC)FloridaStar2Star Communications, LLCFloridaStar2Star Communications, LLC provides cloud-based voice and unified communications solutions to small and mid-sized businesses, and large enterprises.$438.045.52x29.89x
03/29/2021Charles River Laboratories International, Inc. (NYSE:CRL)TennesseeCognate BioServices, Inc.TennesseeCognate BioServices, Inc. provides cell and cell-mediated gene therapy products development and manufacturing services to biotechnology companies and institutions in the United States.$875.00--
03/18/2021Neon Bloom, Inc. (OTCPK:NBCO)FloridaBazelet Health Systems, Inc.FloridaBazelet Health Systems, Inc., a healthcare organization, focuses on medical treatment and healthcare through genetics, scientific, evidence-based research, education, and products.$216.00--
03/15/2021Black Rock Petroleum Company (OTCPK:BKRP)FloridaTorrance Petroleum CompanyFlorida Torrance Petroleum Company owns a 520 acre oilfield in the Monterey Shale.$294.87--
03/12/2021Renaissance Learning Inc.FloridaNearpod Inc.FloridaNearpod Inc. develops a cloud-based platform to enhance the learning process in classrooms and distance learning.$650.00--
03/03/2021ArdianGeorgiaPRGX Global, Inc.Georgia PRGX Global, Inc., together with its subsidiaries, provides recovery audit services to businesses having payment transactions and procurement environments worldwide.$235.021.29x8.70x
03/01/2021Champion Home Builders, Inc.GeorgiaScotbilt Homes, Inc.GeorgiaScotbilt Homes, Inc. manufactures homes.$53.00--
02/26/2021Ayr Wellness Inc. (CNSX:AYR.A)FloridaLiberty Health Sciences Inc.Florida Liberty Health Sciences Inc. engages in the production and distribution of medical cannabis in the United States.$308.165.74x10.13x
02/24/2021Solar Integrated Roofing Corporation (OTCPK:SIRC)South CarolinaCornerstone Construction, LLCSouth Carolina Cornerstone Construction, LLC offers residential and commercial roofing construction services.$62.404.16x-
02/23/2021Beam Therapeutics Inc. (NasdaqGS:BEAM)GeorgiaGuide Therapeutics, LLCGeorgiaGuide Therapeutics, Inc., through its proprietary screening platform, discovers and develops nanoparticles to deliver therapeutics for gene therapy.$440.00--
02/16/2021Flex-Tek Group, Inc.GeorgiaRoyal Metal Products LLCGeorgiaRoyal Metal Products LLC offers residential and light commercial sheet metal HVAC products.$107.581.39x-
02/01/2021Knight-Swift Transportation Holdings Inc. (NYSE:KNX)South Carolina Eleos Technologies, LLCSouth Carolina As of February 1, 2021, operates as a subsidiary of Knight-Swift Transportation Holdings Inc.$41.30--
02/01/2021AdaptHealth Corp. (NasdaqCM:AHCO)Florida AeroCare Holdings, Inc.Florida AeroCare Holdings, Inc. distributes home medical equipment in the United States.$2,025.66--
01/31/2021Dream Finders Homes, LLCFloridaCentury Homes Florida, LLCFlorida Century Homes Florida, LLC provides homebuilding services.$28.90--
01/12/2021Porch Group Inc. (NasdaqCM:PRCH)FloridaV12FloridaV12 provides Data-as-a-Service solutions to power right-time marketing return on investments.$28.00--
01/04/2021OneWater Marine Inc. (NasdaqGM:ONEW)FloridaRoscioli Yachting Center, Inc.Florida Roscioli Yachting Center, Inc. operates a shipyard and yacht repair facility.$30.402.03x-
01/04/2021Clear Link Technologies, LLCFloridaTaylor Media Corp.Florida Taylor Media Corp., doing business as The Penny Hoarder, publishes personal finance information on its portal.$102.502.05x-
12/31/2020Caesarstone USA, Inc.FloridaOmicron Supplies, LLCFloridaOmicron Supplies, LLC imports and sells natural stone products.$27.00--
12/31/2020Malibu Boats, LLCFloridaMaverick Boat Group, Inc.Florida Maverick Boat Group, Inc. designs and manufactures shallow-water flat skiffs, flatboats, and technical poling skiffs.$150.001.25x-
12/31/2020Safe Harbor Marinas, LLCFloridaRybovich Boat Company, LLCFlorida Rybovich Boat Company, LLC engages in hauling, yacht refinishing, mechanical work, carpentry work, electrical work, mast and rigging, and metal fabrication for the superyacht industry.$368.80--
12/30/2020First Reserve CorporationFlorida The Goldfield CorporationFloridaThe Goldfield Corporation, together with its subsidiaries, provides electrical transmission construction and maintenance services to the energy infrastructure industry throughout the Southeast and mid-Atlantic regions of the United States and Texas.$233.861.15x8.00x
12/28/2020UFP Industries, Inc. (NasdaqGS:UFPI)FloridaPalletOne, Inc.Florida PalletOne, Inc. manufactures and distributes pallet-related products in the United States.$232.00 - - 6.27x
12/23/2020Akzo Nobel N.V. (ENXTAM:AKZA)Florida New Nautical Coatings, Inc.Florida New Nautical Coatings, Inc., doing business as Sea Hawk Paints, develops and manufactures antifouling paints and coatings.$71.97--
12/23/2020PPG Industries, Inc. (NYSE:PPG)North CarolinaEnnis-Flint Inc.North Carolina Ennis-Flint Inc. manufactures and supplies pavement marking materials.$1,150.00--
12/23/2020The Home Depot, Inc. (NYSE:HD)Georgia HD Supply Holdings, Inc.Georgia HD Supply Holdings, Inc. operates as an industrial distributor in North America.$10,315.421.34x8.77x
12/18/2020Central Garden & Pet Company (NasdaqGS:CENT)GeorgiaP & M Solutions, LLCGeorgia P & M Solutions, LLC, doing business as DoMyOwn, online retails pest control products in the United States.$83.00--
12/18/2020Blackstone Real Estate Income Trust, Inc.Florida Simply Storage Management, LLCFloridaSimply Storage Management, LLC, doing business as Simply Self Storage LLC, operates a network of self-storage facilities.$1,200.00--
12/17/2020Assurant, Inc. (NYSE:AIZ)TennesseeEPG Insurance, Inc.Tennessee EPG Insurance, Inc. offers insurance products and services for heavy equipment and trucking industries.$43.00--
12/16/2020SPS Commerce, Inc. (NasdaqGS:SPSC)FloridaData Masons Software, LLCFlorida Data Masons Software, LLC develops EDI solutions for consumer goods, industrial and distribution businesses, and resellers.$100.00--
12/15/2020National Bank of Canada (TSX:NA)GeorgiaCredigy Solutions Inc.GeorgiaCredigy Solutions Inc. offers specialty finance solutions.$300.003.69x-
12/14/2020Sun Capital Partners, Inc.FloridaMiami Beach Medical Group LLCFlorida Miami Beach Medical Group LLC operates a medical and wellness center in South Florida.$500.00--
12/10/2020CleanSpark, Inc. (NasdaqCM:CLSK)GeorgiaATL Data Centers LLCGeorgia ATL Data Centers LLC operates data centers for e-commerce and bitcoin mining.$28.08--
12/09/2020Ventures Acquisition LLCNorth Carolina Piedmont Coca-Cola Bottling PartnershipNorth Carolina Piedmont Coca-Cola Bottling Partnership distributes and markets nonalcoholic beverages in North Carolina and South Carolina.$100.00--
12/02/2020FLIR Systems, Inc. (NasdaqGS:FLIR)FloridaAltavian, Inc.Florida Altavian, Inc. manufactures open-architecture unmanned aerial systems (UAS) for collecting data intelligence in the toughest commercial, civil, and defense environments.$36.60--
12/01/2020Bayer Aktiengesellschaft (XTRA:BAYN)North Carolina Asklepios BioPharmaceutical, Inc.North Carolina Asklepios BioPharmaceutical, Inc., a biotechnology company, develops and delivers adeno-associated virus gene therapy.$4,000.00--
11/25/2020Four Twenty CorporationGeorgia SweetWater Brewing Company, Inc.Georgia SweetWater Brewing Company, Inc. operates as a microbrewery.$370.675.43x16.09x
11/04/2020Shift4 Payments, Inc. (NYSE:FOUR)FloridaInfomart2000 Corp.Florida Infomart2000 Corp., doing business as 3dcart, designs and develops eCommerce software to business clients in a range of industries.$59.10--
10/29/2020SolarWinds Corporation (NYSE:SWI)North Carolina SQL Sentry, LLCNorth Carolina SQL Sentry, LLC, a software developer, developed a SQL Server and Microsoft Data Platform.$142.50--
10/20/2020Splunk Inc. (NasdaqGS:SPLK)Georgia Rigor, Inc.Georgia Rigor, Inc. develops web-based performance monitoring and optimization software that helps companies to optimize and operate web and mobile applications.$38.00--
10/13/2020Entravision Communications Corporation (NYSE:EVC)Florida Cisneros InteractiveFlorida Cisneros Interactive offers digital advertising services.$29.90--

Source: S&P Captial IQ