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Top dealmakers and investors have warned that the incoming Trump administration could use approval of cross-border deals to pressure foreign governments to align with US policy priorities, such as increasing defense spending.
Several advisers who have had discussions with people close to the president-elect said Donald Trump is determined to use all government agencies to push other countries to support his agenda, including by withholding deal approvals for their companies.
“We are certainly preparing for this,” said one European M&A banker. “The people in this administration have no compunction about using every means at their disposal to achieve their goals.”
Trump is expected to pressure European countries to increase their defense spending Up to 5 percent of GDP and lobbying for more favorable terms from trading partners. He threatened to impose tariffs on imports into the United States from Europe and other allies.
Inbound deals are overseen by the Committee on Foreign Investment in the United States, or Cfius, which screens transactions for U.S. national security risks. The Interagency Committee is chaired by the Secretary of the Treasury and includes officials from foreign and domestic intelligence agencies as well as senior economic advisers and representatives of key government departments. If a deal is deemed to involve unresolved security risks, Cfius can recommend to the president that the deal be blocked or conditions be placed on it.
The approvals process, once largely bureaucratic, has become increasingly politicized under first the Trump administration and now the Biden administration, according to several people who spoke to the Financial Times. In practice, the committee has broad authority to determine what constitutes a threat to national security, which opens room for political maneuvering.
“CFIUS has broad discretion to do whatever they want, as long as there is some connection to national security,” said one lawyer for cross-border deals. “There are some deals (in the pipeline) now – let's see what happens when they go through the Cfius process.”
Bill Wrench, head of international business at the Center for Strategic and International Studies, said CFIUS's analysis of Nippon Steel's planned purchase of US Steel was too political. Joe Biden's rejection of the deal marks the first time a US president has intervened to stop a deal involving a non-Chinese company acquiring a target that has no US military contracts. This refusal is now the subject of a lawsuit.
“The president announced early on his opposition to the deal, which poisoned the well and sent a strong message about what bureaucrats should do,” Wrench said. He added: “(Trump) tends to look at these matters from a personal point of view, and what he believes is in his interest. “It will be political during his reign as well.”
A Treasury Department spokesperson declined to comment on the politicization of CFIUS under Biden. Trump's transition team did not respond to a request for comment.
During his first term, Trump sought to restrict the social media platform TikTok, owned by Chinese parent company ByteDance, in part through the Cfius review. It also blocked a chip maker registered in Singapore Broadcom attempted a $142 billion hostile takeover From rival Qualcomm in 2018, based on Cfius recommendations.
“Trump’s first president was an amateur,” said another lawyer who focuses on foreign investment. “This time he will know how to leverage the levers of power and he will not only use CFIUS, but he will use the antitrust agencies, the Fed and much more. . . . It will all be highly unpredictable.
