Original Author: Kyousuke

Original Source: AI Rui Pu Si

On April 27, the Office of the Foreign Investment Security Review Working Mechanism of the National Development and Reform Commission (NDRC) officially issued a prohibition decision, blocking Meta's acquisition of AI agent company Manus.

This deal, once considered the third-largest acquisition in Meta's history, lasted only four months from its announcement in December 2025 to being blocked in April 2026.

Key Timeline of the Manus Acquisition Case

In March last year, Manus was officially launched. The Monica.im team introduced the world's first general-purpose AI agent. It took the market by storm upon its release, with invitation codes fetching high prices, and its annualized revenue quickly surpassed $125 million.

On December 30 last year, Meta announced it would acquire Manus' parent company, Butterfly Effect, for $3-5 billion. Negotiations took just over ten days, and founder Xiao Hong was set to become a Meta Vice President.

On January 8, regulatory investigations began. The Ministry of Commerce, in conjunction with relevant departments, launched an assessment to verify compliance in areas such as technology export, data cross-border transfer, and foreign investment declaration.

In March, the NDRC summoned executives from both sides, highlighting risks related to technology transfer and data security, and demanded a halt to the process.

On April 27, the Office of the Foreign Investment Security Review Working Mechanism officially prohibited the transaction, requiring the acquisition to be rescinded and the status quo ante to be restored.

Rescinding the Transaction: Comprehensive Restoration from Equity to Data

According to Article 12 of the "Foreign Investment Security Review Measures," after the state makes a prohibition decision, the core requirement is to restore the state to before the investment was implemented within a specified period, eliminating the impact on national security. This involves three specific modules:

(I) Equity and Transaction Entity Level

The parties shall sign a written termination agreement, rescinding the acquisition and terminating all ancillary documents (such as shareholder agreements, technology transfer agreements, etc.).

If Meta has already completed the equity transfer, all Manus shares held by Meta must be transferred back to the original shareholders/domestic entities, and corresponding changes in industrial and commercial registrations and overseas entity registrations must be completed.

Regulatory authorities will oversee the equity change to ensure there is no "disguised control" (e.g., through contractual arrangements, nominee holdings, etc.).

(II) Return of Funds and Consideration

Meta must fully refund the approximately $2 billion already paid (including deposits, advance payments, etc.) back to the transaction-related accounts.

After receiving the funds, the original shareholders must comply with regulatory requirements to return the foreign exchange through the original channels and report to the foreign exchange regulatory authorities.

Both parties must handle intermediary fees, penalties for breach of contract, etc., and are prohibited from completing the consideration payment through disguised means such as "compensation" or "consulting fees."

The foreign exchange administration will thoroughly audit the fund flow path to prevent capital flight under the guise of "terminating the transaction."

(III) Data and Technology Security

Data Isolation and Deletion:

Meta must delete all obtained Manus domestic user data, training data, and business data, provide proof of deletion, and submit to verification; Manus must restore data localization storage and terminate all data cross-border transfer channels.

Technology and Code Restoration:

Terminate all technology licenses and code transfers to Meta, regain control over core AI technologies and algorithm models, and prohibit Meta from using any Manus technological achievements; delivered technical documents and code copies must be destroyed.

Personnel and Management Isolation:

All Meta-assigned management and technical personnel must withdraw, and all management agreements involving control rights must be terminated, ensuring the complete autonomous management of the domestic entity.

Core Reasons: Violating Three Critical Red Lines

1. Technology and Data Security

Manus's core technology was developed domestically by a Chinese team. During the transaction, the main entity structure was moved to Singapore. Regulators investigated whether this constituted "technology laundering" to circumvent China's technology export controls. Core algorithms, training data, and user data could potentially flow overseas through the acquisition, directly threatening data sovereignty and technology security.

2. Compliance Loopholes in Foreign Acquisitions

This transaction, ostensibly an "American company acquiring a Singaporean entity," was essentially a case of China's domestic AI technology being acquired by a foreign entity through a change in the overseas entity structure, without undergoing China's foreign investment security review procedures. Regulators determined this was a textbook case of "circumventing review in cross-border M&A."

3. Restructuring to Evade Regulation

The "Foreign Investment Security Review Measures" explicitly require that foreign acquisitions involving key technologies and data must undergo a security review. By attempting to transfer control rights through a path of "domestic R&D + overseas shell company + foreign acquisition," Manus failed to declare the transaction, rendering it invalid.

Regulatory Oversight and Subsequent Constraints

The involved parties must complete all the above operations within the time limit set by the regulatory authorities. The Office of the Working Mechanism, in conjunction with the NDRC, Ministry of Commerce, Cyberspace Administration, and Foreign Exchange Administration, will conduct on-site inspections to confirm the transaction has been fully reversed.

If the rescission is not carried out as required, regulatory authorities may impose penalties such as fines, restrictions on domestic business operations, and prohibition of the involved entities from engaging in foreign investment activities. Relevant responsible persons will also face legal liability.

More importantly, any future cross-border cooperation or financing activities involving Manus and its original shareholders must undergo statutory procedures such as foreign investment security review and data export security assessment. They must no longer transfer control rights, data, or technology overseas by circumventing the review process.

No More Grey Zones for AI Cross-Border M&A

This prohibition decision is not just an isolated case; it draws a clear boundary for the entire AI industry:

It explicitly prohibits the "domestic R&D + overseas shell company + foreign acquisition" transfer path; cross-border M&A in the AI field must undergo a complete security review and data assessment process; control of AI technology developed within China must not be transferred overseas without review.

For Meta, the termination of the acquisition plan means missing out on key AI Agent technology assets, and it must fully refund any amounts already paid. For the Manus team, it means restoring control to the domestic entity, terminating all cooperation with Meta, and returning to compliant operations within China.