This article is an extract from TLR The Mergers & Acquisitions Review - Edition 16. Click here for the full guide.

I Introduction

In addition to myriad of issues to consider during M&A transactions, parties should conduct due diligence related to US trade regulations and the often-related foreign investment regulations that arise in the context of an acquisition by a foreign company.

This chapter will focus on two essential considerations when conducting trade due diligence:

1. successor liability based on previous or ongoing violations by the target company; and
2. the impact of foreign investment reviews triggered by acquisition or investment by foreign persons.

Note that we will only address pre-acquisition concerns and notification requirements in this article and will not delve into post-acquisition integration issues that can arise after closing.

US courts and federal agencies have repeatedly applied successor liability for violations of trade regulations to acquiring companies. Because many trade regulatory regimes are governed by strict liability and hefty penalties, successor liability may entail significant financial risk for the acquiring companies.

Of considerable importance are the foreign investment reviews that could trigger voluntary or mandatory filings with the US Committee on Foreign Investment in the United States (CFIUS) – the latter being a relatively new requirement – as well as mitigation of Foreign Ownership, Control or Influence (FOCI) when...

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