Last month, President Trump ordered the immediate abandonment of the proposed buyout of microchip maker Qualcomm Incorporated, a Delaware corporation, by Broadcom Limited, a limited company organized under the laws of Singapore (and formerly based here in Orange County). This is right on the heels of President Trump supporting Broadcom’s decision to reincorporate in the United States.
Citing national security concerns, President Trump issued his Executive Order prohibiting the takeover and stating that all 15 Broadcom candidates for the Qualcomm Board of Directors are disqualified. The U.S. Treasury’s Committee on Foreign Investment in the U.S. (CFIUS) had already raised concerns about the transaction listing issues such as Broadcom’s reputation for cutting research spending.
Certainly, it sets an arguably questionable precedent to allow a foreign company to reincorporate in the U.S. so as to avoid CFIUS review. And no one questions the authority of the President’s office to issue an Order based on national security grounds. However, upon further research and reflection, the question is:
What effect does this have on future technology deals and infusion of capital?
Putting cards on the table, Broadcom was clearly only headquartered in Singapore to take advantage of tax incentives and was returning to the United States It was not a type of ROC Chinese bid that would have put American technology in the hands of China.
Has a new precedent been set for foreign purchases of domestic U.S. companies?
And what about U.S. companies acquiring foreign companies to leverage economies of scale?
Will U.S. companies face tougher sets of criterion from foreign foes and pseudo-foes?
Only time will tell. Infusion of capital and investment interest is always the backbone of M&A. Hopefully, deals will be on track for the remainder of 2018. We’ll stay tuned and see.
Michael C. Carroll, Esq., Managing Partner, CorpGen Counsel
Michael C. Carroll brings a wealth of securities, governance, M&A, private equity, real estate, transactional, and general corporate law experience to public companies, privately-held companies, private equity firms, and individual clients.
Mr. Carroll was previously Senior Vice President, Chief Compliance Officer, and General Counsel of Medallion Financial Corp., a NASDAQ-traded commercial lender and FDIC-insured bank, and was Senior Counsel of Aames Investment Corporation, a NYSE-traded real estate investment trust. Prior to his in-house positions, he practiced in the corporate law department of the international Am Law 50 law firm of Willkie Farr Gallagher, LLP in New York.