Potential US TikTok Buyers Seek New Ways To Close Deal
The Chinese authorities recently changed their export control rules so that the software algorithms used by the TikTok service were included in the list of those assets, the transfer of which overseas requires special permission. Potential buyers of the TikTok business in the United States are now trying to develop tactics for negotiating a deal that would take into account the interests of all parties.
As Reuters explains, citing knowledgeable sources, so far four possible ways of implementing the deal have been identified. The first involves the purchase of TikTok assets in the United States without transferring the Chinese-licensed algorithm. This would speed up the sale, but it would bring little benefit to the buyer since he would have to develop or purchase on the side an alternative algorithm for finding content demanded by a specific user, which is TikTok’s main know-how.
The second option involves obtaining permission from the authorities of the PRC and the United States to increase the transition period with the transfer of assets and the algorithm to one year. This scenario includes certain political risks since it is difficult to predict how relations between China and the United States will develop after the November presidential elections in the latter country.
The third option takes into account the latest changes in the PRC export control rules. It simply means getting the necessary permission to transfer the TikTok search algorithm to a select US company that is to become the new owner of the US business.
The fourth option is close to the third, only it implies the licensing of the algorithm by the American buyer directly from the Chinese company ByteDance, which developed the TikTok application. The political risk is visible here as well, since the existence of a legal relationship between the American buyer and the creators of TikTok after the conclusion of the deal may not suit the US authorities, who would like to completely eliminate such relationships.
ByteDance must sell the American business to TikTok by November 12, as US President Donald Trump has set that date by his order. By September 20th, US companies should stop using TikTok. If a buyer for the American business TikTok is not found by November 12, then the service in the country will be completely banned. There will be a presidential election in the United States in November, so it is in ByteDance’s interests to delay the resolution of the issue in the hope of a change in the situation after the election.
