National Security and Investment: Mandatory Notifications for SynBio M&A

Takeaway: For synthetic biology companies, securing investment or planning an acquisition is no longer just a financial transaction; it's a matter of national security, requiring mandatory government notification and approval to prevent sensitive dual-use technologies from falling into foreign hands.

As a founder in synthetic biology, you are rightfully focused on your science, your team, and your path to market. However, as your company grows and you begin to seek major investment or consider an acquisition, you will encounter a powerful and often overlooked stakeholder: the government's national security apparatus.

In recent years, governments around the world, including the U.S. and the UK, have recognized that advanced technologies like synthetic biology are not just economic assets but are also critical to national security. Synbio's potential to create novel materials, medicines, and bioweapons makes it a "dual-use" technology—one with both beneficial civilian and potentially harmful military applications. As a result, governments have implemented robust new regulations to scrutinize, and potentially block, foreign investment into and acquisition of companies in this sensitive sector.

The U.S. Gatekeeper: CFIUS

In the United States, the primary body responsible for this is the Committee on Foreign Investment in the United States (CFIUS).

  • What it is: CFIUS is an inter-agency committee, chaired by the Secretary of the Treasury, that has the authority to review any transaction that could result in the control of a U.S. business by a foreign person or entity.

  • Its Mandate: CFIUS’s sole mission is to assess whether a given transaction poses a risk to U.S. national security.

  • Mandatory Declarations: The rules have become much stricter in recent years. For a company involved with a "critical technology" like biotechnology, a transaction involving certain foreign investors requires a mandatory declaration to CFIUS, even for non-controlling minority investments. Failure to file can result in severe penalties.

  • The Power to Block: If CFIUS determines that a transaction poses an unacceptable risk to national security that cannot be mitigated, it can recommend that the President of the United States block the deal entirely.

The UK Counterpart: The National Security and Investment (NSI) Act

The United Kingdom has implemented a similar, and in some ways even more expansive, regime under the National Security and Investment (NSI) Act 2021.

  • What it is: The NSI Act gives the UK government the power to review and potentially block acquisitions and investments in 17 sensitive sectors of the economy, with "Synthetic Biology" being one of the explicitly named areas.

  • Mandatory Notification: The rules are not discretionary. If you are a UK company operating in synthetic biology and are planning an acquisition by almost any foreign entity (or even a UK entity in some cases), you must notify the government's Investment Security Unit (ISU) before the transaction can be completed.

  • Broad Scope: The NSI Act can cover not just the sale of a company but also the acquisition of assets, such as key intellectual property.

Implications for SynBio Founders

This new era of national security scrutiny has profound implications for your fundraising and exit strategy.

  • Investor Diligence is a Two-Way Street: When considering an investment from a foreign venture fund or corporate strategic, you must now conduct diligence on them. Where is their capital from? Who are their ultimate beneficial owners? A relationship with the "wrong" foreign investor could hamstring your company's ability to operate or exit in the future.

  • Build it into Your Timeline: The CFIUS or NSI review process can add months to a transaction's timeline. This must be factored into your planning for any major financing round or M&A deal.

  • Strategic Considerations: The nationality of your investors and potential acquirers is now a major strategic variable. In some cases, accepting a slightly lower offer from a "friendly" domestic acquirer may be preferable to a higher offer from a foreign entity that triggers a long and uncertain national security review.

In the 21st century, synthetic biology is considered critical infrastructure. Founders must recognize that their work has geopolitical significance and be prepared to navigate the complex intersection of innovation, commerce, and national security.

Disclaimer: This post is for general informational purposes only and does not constitute legal, tax, or financial advice. Reading or relying on this content does not create an attorney–client relationship. Every startup’s situation is unique, and you should consult qualified legal or tax professionals before making decisions that may affect your business.