How realistic is a 45-day sale for TikTok?

August 7, 2020, 2:15 PM UTC

Good morning, Term Sheet readers. Tech writer Danielle Abril here, filling in for Lucinda.

I’m watching the clock as time ticks away for TikTok.

On Thursday, President Donald Trump signed an executive order that would ban the social media app (plus separately Chinese-owned WeChat) in the U.S. if it isn’t sold within 45 days. 

That’s left TikTok’s owner ByteDance with about six weeks to attract suitors, hammer out complex negotiations, and sign a deal.

Fortunately for TikTok, Microsoft is champing at the bit. Meanwhile, ByteDance CEO Zhang Yiming reportedly told its employees that leadership was working “around the clock” to achieve the “best outcome,” according to Bloomberg. But he believes the timeline is “unreasonable” and that Trump’s “real objective” is to move forward with a ban.

So how practical is Trump’s six-week deadline?

Two experts gave us some insight on the matter: Six weeks is fast, but how fast is debatable.

Adam Haller, a partner who leads Bain & Co.’s tech and M&A practices, said he’s seen deals get done in as quickly as two weeks, though that’s not necessarily the norm. “Every deal is unique, and every deal has its own complexities,” Haller said. “Forty-five days is quick but very much in the window of a normal deal.”

This deal may be a little more complicated, though, Haller added. Potential government inquiries or negotiations during the sale could delay the process.

Chris Griner, chair of the national security and compliance group at Stroock & Stroock & Lavan LLP, said he sees many acquisitions take an average of six months. In cases where there are national security concerns, the government sometimes requests that the company be put into a trust while it searches for a buyer. This helps mitigate the security risk without rushing a deal.

But there’s no two ways about it: TikTok’s sale defies the norm, Griner said. “You have to think of it more as a forced divestiture of a Chinese company,” he said. “That’s what differentiates it.”

Microsoft will likely spend the next few weeks reviewing TikTok’s finances and technical infrastructure and understanding how ByteDance intends to separate TikTok from its business. Microsoft will also have to figure out financing—will it involve a stock swap? Is it an all-cash deal? Does Microsoft need lenders?

And ByteDance will be trying to get the most money out of whatever company ultimately buys TikTok without dragging the process beyond the deadline. Then the deal has to get the blessing of the U.S. government.

Completing a deal like this one boils down to one thing, Griner says: “A lot of midnight oil for some lawyers.”

Danielle Abril


Anne Sraders curated today’s Term Sheet.


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