Publications

Impact of Proposed CFIUS Regulations on Foreign Investment in U.S. Private Equity

Summer 2008
Benjamin M. Polk |  Christian H. Mittweg | Martin Q. Ruhaak
Private Equity Developments - Summer 2008

On May 16, 2008, Booz Allen Hamilton Inc. announced that it would be selling a majority stake in its U.S. government consulting business to the Carlyle Group (“Carlyle”). Several months before the announcement, rumors of a possible deal caused the Service Employees International Union (“SEIU”) to charge that the deal would raise national security concerns. The same concerns have now been voiced again by SEIU, which demanded immediate congressional attention “to examine any national security implications and to clarify present and future control issues before the deal receives regulatory approval.” Cause for such concerns is Carlyle’s September 2007 announcement that it had sold a 7.5% ownership stake to an affiliate of Mubadala Development Company (“Mubadala”), a sovereign wealth fund (“SWF”) wholly owned by the government of Abu Dhabi. Similar investments by SWFs in U.S. private equity firms, such as The Blackstone Group LP and Apollo Investment Management LP, have been announced over the last year. Such SWF investments in U.S. private equity firms, along with a shift generally in the investment strategy of SWFs into “alternative assets,” such as private equity funds, have resulted in demands for greater transparency and disclosure by U.S. private equity funds and their SWF investors.