FinTech

15 The Changing FinTech Landscape: A Snapshot of M&A Themes and Trends FinTech transactions may implicate foreign investment restrictions that can significantly delay or prohibit closing. In the U.S., the reach and authority of the U.S. government over what it considers to be "national security" concerns are broad, increasing, and often not subject to judicial appeal. The Committee on Foreign Investment in the United States (CFIUS) may review transactions for the protection of U.S. critical technologies, resources, and infrastructure. Traditionally, CFIUS jurisdiction was based on whether a merger or acquisition could result in control of a U.S. business by a foreign person. However, under the Foreign Investment Risk Review Modernization Act of 2018 and its implementing regulations, CFIUS has jurisdiction over certain non-controlling foreign investments in U.S. businesses that own or operate critical infrastructure, deal in critical technologies, or collect and maintain large amounts of personal data of U.S. citizens. Although presidential orders blocking or unwinding transactions are rare, they have increased in recent years. Ant Financial's inability to obtain CFIUS clearance in 2018 for its proposed acquisition of MoneyGram is a notable example. In addition, authorities in the U.S. have prohibited or unofficially discouraged transactions with certain Chinese payment platforms including Alipay, WeChat Pay, QQ Wallet, and others. CFIUS may require the entry into "mitigation agreements" to resolve identified national security threats presented by a transaction. Features of these agreements range from prohibitions on transfers of sensitive technologies to protections for U.S. customer data and restrictions on physical and logical access to sensitive U.S. facilities, networks and systems. While CFIUS is regarded as setting the standard on how to scrutinize foreign direct investments, it is by no means alone. The European Union adopted a new mechanism for screening foreign direct investments, which became fully operational in 2020, and in the U.K., a new framework with expansive breadth took effect on January 4, 2022. Foreign investment restrictions will need to be evaluated carefully, particularly for U.S. companies that use sensitive customer data or involve critical technologies. Even U.S. acquirers or investors in U.S. FinTech firms will need to consider whether CFIUS and other restrictions are implicated, especially when venture capital or private equity investments are structured through funds that have sizeable foreign investors. FOREIGN INVESTMENT RESTRICTIONS MAY APPLY

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