Purposeful Advisors Guide to Election Year Chaos Pt 1: Considerations for Mitigating Risk in Inbound & Outbound Foreign Investment and M&A

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While the question wasn’t surprising, the context – a kindergartener’s birthday party – certainly was. You generally don’t expect to be asked, “What impact do you think the election year will have on foreign investment and M&A?” while doling out pizza and melting Carvel cake. But regardless of the setting, it’s a valid question. After thinking about it for a few seconds, my response of “I’m sure it’ll have a big impact. Can you pour that kid some more juice?” left much to be desired. To make up for it, herein is a bit more thought-out reply.

The biannual cliché of “the most polarizing election of our lifetime” has already been implanted in 2024. Still, it’s hard not to view the expected Biden/Trump rematch – and control of the House and Senate – any other way. Aside from the politically charged environment, three issues related to foreign investment should elicit particular interest.

  • Additional refinement to 2018’s FIRRMA regulations, and
  • Executive Orders related specifically to China and possible legislation initiated (probably) out of the Select Committee on the Chinese Communist Party.

Americans agree on very few things. However, “China=bad” and the need to “re-shore” critical supply chains are two of them. Under that shadow, companies looking to be acquired by foreign entities (and foreign companies looking to acquire American entities) or American companies looking to invest in – particularly – China or Russia must think long and hard about how that announcement will be viewed.

Mergers almost always involve job cuts. It’s one of the bedrocks of “synergy.” However, especially in an election year, politicians at all levels will be critical of job losses. If those job losses come at the hands of foreign players – particularly China – the criticism will be even more pointed. Companies need to clearly think through the purpose of their decisions and communicate them in the right way to the right constituencies at the right time.

Companies should be thinking about how their rationale and messaging will be met by several vital audiences: employees (and unions, if applicable), customers, shareholders, media, local and state-wide elected officials, federally elected officials, and regulatory agencies – especially the Committee on Foreign Investment in the United States (CFIUS).

CFIUS, an interagency super committee that evaluates the national security impacts of proposed acquisitions of American assets by foreign entities, works in a black box. Yet, as secretive as the committee may be, politics inevitably can have an impact. The frequency with which Members of Congress and state-wide elected officials send letters to the committee (and release them publicly) has increased drastically. The contours of how, when, why, and where a deal can threaten national security have changed as China has gotten more aggressive with its acquisitions. The media, which hardly ever mentioned CFIUS before the mid-aughts, now has dedicated journalists covering the committee closely. Finding the right advisors to help think through a CFIUS strategy is vital.

2024 will be more polarizing and demonically political than any time in recent memory. Businesses need to consider not just the financial impacts of a proposed investment or deal but also the geopolitical environment and how a proposed deal will play politically at every level. Proper preparation, including speaking to subject matter experts, devising a thorough stakeholder map, and even conducting qualitative/quantitative research, are all things that should be done well in advance.

Purposeful Advisors delivers premium communications advisory, crisis communications, and public affairs services to founders and senior management teams, empowering companies to move minds, bodies, dollars, media, and governments to reach their business objectives.

Purposeful Advisors’ roots are in the boardrooms of the biggest brands in the world and the war rooms of some of the most complicated political and business campaigns in recent memory. With its senior advisors, the team brings over a century of hard-earned experience to start-ups, scale-ups, and midsize enterprises. Purposeful also leverages its expertise to help clients through crises, litigation, and other critical situations.

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