In the wake of the pandemic, some cash-rich foreign acquirers are likely to take a heightened interest in U.S. targets. A Locke Lord memo says that one of the implications of this is that many U.S. in-house lawyers who have focused on purely domestic transactions will need to prepare to address the “international” aspects of the sale of a business that has always been purely domestic.
The memo addresses topics ranging from OFAC’s prohibited persons lists to the CFIUS process and the requirements applicable to defense companies under the International Traffic in Arms (ITAR) regulations. This excerpt addresses the issues associated with “deemed exports”:
Even if your company has never exported a single product or has no intention of doing so, you need to be aware of the deemed export rules if you plan on selling assets or a company in the wake of the pandemic, some cash-rich foreign acquirers are likely to take a heightened interest in U.S. targets, as discussed by a Locke Lord memo a non-US buyer. Under the Export Administration Regulations (and similar rules under the ITAR), a “deemed export” occurs whenever certain controlled technology and information is disclosed or made accessible to a non-US person – and a sale of an entity or assets that includes that technology or information, regardless of whether the buyer takes the assets outside the US, could qualify. If it does qualify, then the seller needs to obtain a license to consummate the transaction (assuming it would not be barred, which is also a possibility).
The memo notes that some potential issues under these various regulatory regimes require a simple check, but others require more substantial analysis. In either case, appropriate upfront diligence on all of them can prevent a significant amount of problems later in the transaction process.
-John Jenkins, DealLawyers.com January 6, 2021