Private Equity Under Increased Foreign Investment Oversight: New Executive Order, Expanded CFIUS Scrutiny

Description

On Aug. 9, 2023, President Biden issued the highly anticipated EO addressing outbound U.S. investments aimed at the development of critical technologies in "countries of concern" for military, intelligence, surveillance, or cyber-enabled capabilities. The EO was effective immediately, but the adoption and implementation of supporting regulations by the Department of the Treasury may not be issued for months.

The EO requires active investment funds--such as those dealing with private equity and venture capital--to notify the Treasury Department of and to seek approval for investments into countries of concern for semiconductors and micro-electronics, quantum information technologies, and certain artificial intelligence systems. U.S. and non-U.S. investors will need to conduct risk assessments on their portfolio companies, engage in deeper due diligence, and plan early for potential regulatory challenges.

CFIUS recently released its annual report to Congress on the Committee's national security reviews and investigations of certain foreign investment transactions from the preceding year. Parties should expect increased CFIUS scrutiny regarding upcoming inbound foreign investment deals and the possibility that mitigation measures may be required. Also, the report underscores the need for sufficient party due diligence into the national security implications of a transaction and for parties to carefully select between filing options when planning a CFIUS strategy.

Listen as our authoritative panel discusses the recent developments in inbound and outbound foreign investment oversight and provides tips for advising clients now on current and contemplated foreign business activity in light of the evolving regulatory landscape.