The clock is ticking on a Microsoft acquisition of TikTok, Trump gives Satya Nadella 45 days to get it done

Kip Kniskern

Donald Trump

Over the weekend, after a late Friday announcement by US President Donald that he planned to ban TikTok from the United States, sending negotiations between ByteDance, the Chinese owners of TikTok, and Microsoft on a sale of the popular video sharing apps US operations into a tailspin. Word came out on Saturday that the two companies were pausing their negotiations, but Trump’s promised Saturday announcement of a US ban never came, and late Sunday Microsoft issued a press release saying that yes, they were planning to acquire operations of TikTok in the US, Canada, Australia, and New Zealand.

In the press release, Microsoft set an unusual timeline, at least for negotiations like these, where the Redmond giant is much more prone to leave itself some leeway with terms like “later this year:”

Microsoft will move quickly to pursue discussions with TikTok’s parent company, ByteDance, in a matter of weeks, and in any event completing these discussions no later than September 15, 2020.

This morning, Reuters is reporting that the unusually specific timeframe is coming from President Trump himself, saying “President Donald Trump only agreed to allow Microsoft Corp to negotiate the acquisition of popular short-video app TikTok if it could secure a deal in 45 days, three people familiar with the matter said on Sunday.” The deadline was “put to ByteDance and Microsoft by the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals for potential national security risks, according to the sources.” Trump and Satya Nadella talked over the weekend about the potential Microsoft TikTok deal, according to the Microsoft press release.

According to the report, Trump faced backlash from leaders in the Republican party as well as some of his own advisors, concerned that a ban would alienate young voters in this election year, would be challenged in court, and would further damage US – China relations. Republican Senator Lindsey Graham tweeted that a Microsoft – TikTok deal was “a win-win in the making.”

The CFIUS will oversee the negotiations and has a right to block any sale, according to anonymous sources referenced by the report. The two companies will have much to negotiate. Along with agreeing on a price, which analysts say could reach some $50 billion, untangling the US/Canada/Australia/New Zealand operations of TikTok from the parent company’s could be problematic:

A key issue in the negotiations will be separating TikTok’s technology from ByteDance’s infrastructure and access, to alleviate U.S. concerns about the integrity of personal data. ByteDance owns a Chinese short video app called Douyin that was based on the same code used for TikTok.

One idea under consideration is to give Microsoft and ByteDance a transition period to develop technology for TikTok that will be completely separate from ByteDance, one of the sources said.

For its part, Microsoft promised to address security and privacy concerns in working out a deal for the operations, according to its late Sunday press release:

This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections. The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries.

Among other measures, Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States. To the extent that any such data is currently stored or backed-up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred.

Word of a possible Microsoft acquisition only surfaced last Friday, so it’s already been a whirlwind of breaking news and back and forth, but getting a deal done in 45 days for such a technically complicated and politically sensitive transaction should make for interesting times, indeed