Smartphone companies are all the rage in the mergers and acquisitions department. Microsoft acquired Nokia in early September to kick off the trend, attempting to gain a foothold in the market. (The October issue of the InsideCounsel print magazine sits down with Microsoft GC Brad Smith to examine this deal in-depth.)
Now, Chinese technology company Lenovo Group Ltd. is following suit. The world’s largest PC maker is looking to gain a Western smartphone hold as well, investigating a full purchase of Canadian smartphone maker BlackBerry Ltd.
Lenovo already manufactures smartphones in China, and the company has already captured a large proportion of its home market. According to research firm Gartner, Lenovo accounts for 4.7 percent of all smartphone sales globally. BlackBerry, meanwhile, has seen its share fall all the way to 2.7 percent.
However, the deal could see multiple hang-ups from both the U.S. and Canadian governments. The Investment Canada Act sets guidelines for foreign acquisitions of Canadian companies, and the government automatically reviews any takeover bid of more than C$344 million ($332 million). As BlackBerry is Canada’s largest corporate spender in research and development, as well as one of the country’s largest employers, the Canadian government may not wish to see the company sold to a foreign manufacturer.
In addition, the U.S. government may also move to block any potential deal. According to The Wall Street Journal, BlackBerry accounts for 470,000 of the 600,000 mobile devices owned and issued by the Defense Department. Even President Obama uses a BlackBerry. The WSJ says the Committee on Foreign Investment in the U.S. (Cifus) would be likely to investigate the deal and determine whether it created any national security risks in the U.S.
This wouldn’t be the first time that Lenovo has acquired a major North American company. In 2005, Lenovo acquired IBM’s PC business for $1.25 billion. At the time, many government officials used IBM computers, just as many government officials used BlackBerrys today.
The largest acquisition of a Western company by a Chinese company is the $4.7 billion acquisition of Smithfield Foods, the world’s largest producer and processor of pork products, by Shuanghui International Holdings Ltd.