Despite the close US-Israel relationship, Israeli companies and funds seeking to invest in US technologies can face US national security scrutiny that could significantly delay deals, and in some cases prevent or unwind the transaction. Israeli investment in US technology companies, however, should continue to be regarded as an attractive option, as long as the right planning and analysis occurs. Below is an overview of the key US regulatory scheme, and the steps to take in order to minimize regulatory delay, risk, and cost.
Notable Israeli technology acquisitions
In 2012 the Committee on Foreign Investment in the United States (CFIUS) approved Stratasys’s acquisition of Objet, both in the digital-manufacturing sector. On the other hand, in another well-publicized case in 2005, Israeli firm Check Point withdrew its application to CFIUS to purchase Sourcefire, and abandoned the effort to acquire the company, which was later bought by Cisco. This was not surprising to anyone in this business, based on two terms written in a press article regarding the deal - “network security company whose clients include US intelligence agencies.”
What is CFIUS?
The US Foreign Investment and National Security Act (FINSA) of 2007 enhanced the powers of the Committee, which implements a national security review of foreign acquisitions of, or significant investments in, a US asset that could pose a risk to US national security.