Mergers and acquisitions (M&A) are complex transactions that require careful attention to numerous legal, financial, and operational considerations. For companies involved in classified contracts or requiring security clearances, security clearance compliance is a critical factor that can significantly impact the success of the transaction.
At National Security Law Firm (NSLF), we specialize in helping businesses navigate the intricacies of security clearance compliance, ensuring smooth transitions during M&A transactions while safeguarding classified capabilities.
Why Security Clearance Compliance Matters in M&A
Security clearance compliance is essential for companies engaged in classified work, as failure to address it properly during an M&A transaction can lead to:
- Loss of Security Clearances: Clearances tied to the target company may lapse or be revoked if compliance issues arise.
- Contract Delays or Terminations: Classified contracts may be delayed or terminated if the acquiring company fails to meet clearance requirements.
- Increased Regulatory Scrutiny: Federal agencies such as the Defense Counterintelligence and Security Agency (DCSA) closely monitor compliance during ownership changes.
To avoid these risks, security clearance compliance should be a top priority from the earliest stages of the M&A process.
Key Steps for Security Clearance Compliance in M&A
1. Conduct a Security Clearance Due Diligence Review
Before finalizing the transaction, it’s critical to understand the clearance status of the target company. This includes:
- Reviewing Facility Security Clearances (FCLs) and associated personnel clearances (PCLs).
- Identifying any pending security clearance issues, such as denials, revocations, or Loss of Jurisdiction.
- Ensuring compliance with National Industrial Security Program Operating Manual (NISPOM) requirements.
2. Address Foreign Ownership, Control, or Influence (FOCI)
Foreign ownership or investment in a company with classified contracts can raise significant national security concerns. If FOCI is present, the acquiring company must work with the DCSA to implement mitigation measures, such as:
- Establishing a Special Security Agreement (SSA) or Proxy Agreement.
- Restructuring ownership or governance to reduce foreign control.
Proper FOCI mitigation ensures the transaction complies with federal regulations and preserves the target company’s clearance eligibility.
3. Notify the DCSA Early
The DCSA requires timely notification of changes in ownership or control for companies holding Facility Security Clearances. Early communication allows the agency to:
- Evaluate the impact of the transaction on security compliance.
- Guide the acquiring company on required steps to maintain clearances.
Failing to notify the DCSA promptly can result in delays, penalties, or loss of clearances.
4. Develop a Transition Plan
M&A transactions often involve personnel changes, operational restructuring, and integration of compliance programs. To ensure security clearance compliance:
- Designate a Facility Security Officer (FSO) or equivalent to oversee the transition.
- Train key personnel on updated policies and procedures.
- Address potential clearance risks for employees impacted by the merger or acquisition.
A well-crafted transition plan minimizes disruptions and ensures ongoing compliance during the integration process.
5. Work with Experienced Legal Counsel
Navigating security clearance compliance during an M&A transaction requires specialized expertise. At NSLF, our attorneys bring decades of experience in security clearance law, including advising on compliance in complex M&A transactions. We can:
- Conduct due diligence reviews and identify compliance risks.
- Assist with FOCI mitigation and regulatory notifications.
- Develop transition plans and provide ongoing support post-transaction.
Why Choose National Security Law Firm for M&A Compliance?
- Insider Knowledge: Our attorneys have military and federal backgrounds, giving us unique insights into the security clearance process.
- Tailored Solutions: We customize our approach to meet the specific needs of your transaction.
- Proven Results: NSLF has successfully guided numerous companies through security clearance compliance challenges during M&A.
Secure Your Success in M&A Transactions
Security clearance compliance doesn’t have to derail your M&A transaction. With NSLF’s expertise, you can confidently navigate the process and protect your classified capabilities.
- Call us now: (202) 600-4996
- Book a consultation: Schedule Now
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