Buying a business in USA as a foreigner: Key considerations

As the business world wrestles with economic and regulatory challenges and uncertainty, non-US companies may be considering whether now is an opportune time to enter the US market through an acquisition of a business operating in the USA. Companies willing to make a purchase should therefore consider a few things in advance.

The purchase of a US company by a non-US company can bring numerous advantages to the buyer. However, despite the benefits, cross-border M&A involving a US target also present various legal complexities that may require early engagement with US counsel.

Transaction structure and tax

Non-US buyers should consider the type of acquisition vehicle to utilise in a proposed transaction, particularly in respect of the US and non-US tax treatment of the acquisition vehicle. The transaction structure (asset purchase or stock purchase) and the tax treatment of the target company (a corporation or ‘flow-through’) will often dictate whether a new acquisition vehicle should be formed and, if so, the jurisdiction and tax treatment of that vehicle.

Labour, employment and immigration

Buyers should conduct due diligence to confirm a target company’s compliance with labour and immigration laws and avoid the potential for successor liability to back pay or other unpaid compensation that may be owed to employees as a result. Buyers should also be aware of the applicability of federal and state law to non-compete agreements, as well as potential successorship to a target company’s collective bargaining agreements.

Companies considering acquiring a business in the USA should consult with legal counsel early on to ensure a successful transaction.

Edward C. Normandin, Attorney/Lawyer, Partner, Pryor Cashman LLP*, New York, New York

Employee benefits

Buyers should evaluate the target company’s benefit plans under ERISA and other applicable law with respect to potential transferability, termination, or successor liability. Continuity or replacement of health, retirement and incentive plans should be addressed early to ensure a smooth transition.

Regulatory matters

Buyers should be aware of regulatory review by agencies such as the Committee on Foreign Investment in the United States (CFIUS) or antitrust review bodies that may require filings or delay cross-border transactions. Sector-specific regulations (e.g., banking, energy, healthcare) may impose additional hurdles to transactions.

Data privacy and cybersecurity

US privacy laws vary by state and are evolving. Buyers should be aware that multiple laws may apply to a transaction with respect to data privacy and cybersecurity issues.

Conclusion

Cross-border M&A in the US demand strategic planning and careful legal diligence (see box for more on this topic).

For further information please contact:

Edward C. Normandin, Attorney/Lawyer, Partner, Pryor Cashman LLP*, New York, New York
Email: enormandin@pryorcashman.com

Nicole Park, Associate, Pryor Cashman LLP*, New York, New York
Email: npark@pryorcashman.com

*Ecovis cooperates with Pryor Cashman LLP, a US-based law firm with offices in New York and Los Angeles.