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New Executive Order on Securing the Information and Communications Technology and Services Supply Chain May Impact M&A

By | May 15, 2019

On May 15, 2019, President Donald Trump issued an Executive Order on Securing the Information and Communications Technology and Services Supply Chain. The order provides in part (emphasis added):

The following actions are prohibited:  any acquisition, importation, transfer, installation, dealing in, or use of any information and communications technology or service (transaction) by any person, or with respect to any property, subject to the jurisdiction of the United States, where the transaction involves any property in which any foreign country or a national thereof has any interest (including through an interest in a contract for the provision of the technology or service), where the transaction was initiated, is pending, or will be completed after the date of this order, and where the Secretary of Commerce (Secretary), in consultation with the Secretary of the Treasury, the Secretary of State, the Secretary of Defense, the Attorney General, the Secretary of Homeland Security, the United States Trade Representative, the Director of National Intelligence, the Administrator of General Services, the Chairman of the Federal Communications Commission, and, as appropriate, the heads of other executive departments and agencies (agencies), has determined that:

(i)   the transaction involves information and communications technology or services designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary; and

(ii)  the transaction:

(A)  poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of information and communications technology or services in the United States;

(B)  poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the digital economy of the United States; or

(C)  otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons.

The broad prohibition on acquisitions indicates the Executive Order merits consideration in pending or newly initiated M&A transactions involving information and communications technology and related services from foreign governments and persons. Unfortunately, the Executive Order does not appear to include a mechanism where questions of the applicability of the Executive Order can be speedily resolved at this time.

Contact Steve Quinlivan for more information.

Topics: 
M&A