Top dealmakers and investors have warned that the incoming Trump administration may use the approval of cross-border deals to pressure foreign governments to align with U.S. policy priorities, such as increased defense spending.
Donald Trump is determined to use all government agencies to push other countries to support his agenda, including refusing to approve deals for their companies, according to several advisers who have had discussions with people close to the president-elect.
"Of course we are preparing for this," said a European M&A banker. "The people of this administration have not hesitated to use every means at their disposal to achieve their goals."
Trump is expected to pressure European countries to increase defense spending to 5% of GDP and push trading partners to offer more favorable terms. He has threatened to impose tariffs on goods imported into the United States from Europe and other allies.
Inbound transactions are regulated by the Committee on Foreign Investment in the United States (Cfius), which screens transactions for whether they pose a national security risk to the United States. The inter-agency group is chaired by the Treasury Secretary and includes officials from domestic and foreign intelligence agencies as well as senior economic advisers and representatives from key government departments. If a transaction is deemed to present unresolved security risks, CFIUS can recommend that the president block the transaction or impose conditions on the transaction.
Several people who spoke to the Financial Times said the approval process was once largely bureaucratic but has become increasingly politicized under the first Trump administration and now the Biden administration. In effect, the committee has broad authority to determine what constitutes a national security risk, creating room for political maneuvering.
“As long as there is some national security relationship, CFIUS has broad discretion to do what they want to do,” said one cross-border transactions lawyer. “There are some deals (in the pipeline) right now — let’s see what happens when they go through the CFIUS process.”
Bill Reinsch, chairman of international operations at the Center for Strategic and International Studies, said the Committee on Foreign Investment in the United States' analysis of Nippon Steel's planned acquisition of U.S. Steel was too political. Joe Biden's rejection of the deal is the first time a U.S. president has intervened to block a deal involving a non-Chinese company acquiring a target that does not have U.S. military contracts. That rejection is now the subject of a lawsuit.
“The president poisoned the well by announcing his opposition to the deal early on and sent a strong message about what bureaucrats should do,” Reinsch said. “(Trump) tends to take these things personally. , what he thinks is in his interest, it will also be political."
A Treasury Department spokesman declined to comment on the politicization of the Committee on Foreign Investment in the United States under Biden. The Trump transition team did not respond to a request for comment.
During his first term, Trump sought to restrict TikTok, the social media platform owned by Chinese parent company ByteDance, in part through scrutiny by the Committee on Foreign Investment in the United States. He also blocked Singapore-registered chipmaker Broadcom's planned $142 billion hostile takeover of rival Qualcomm in 2018 on the advice of the Committee on Foreign Investment in the United States.
“The first President Trump was an amateur,” said another attorney who focuses on foreign investment. "This time, he's going to know how to use the levers of power, and he's going to use not just the Committee on Foreign Investment in the United States, but he's going to use the antitrust agencies, the Federal Reserve, etc. … It's all going to be highly unpredictable."