Meta is preparing to unwind its $2.5 billion acquisition of AI agent startup Manus, and it has acknowledged it will have to let the company's founders go, according to the Wall Street Journal. The deal, signed in December last year, saw Meta buy the Singapore-based company—whose technology originated in China—and quickly integrate its systems. But on Monday, Beijing blocked the transaction on national security grounds, leaving Meta with a mess: how do you extract something you've already absorbed?
Beijing has given Meta a preliminary deadline of a few weeks to restore Manus's Chinese assets to their original state and strip out any transferred data and technology from Meta's systems, or face penalties on both parties. Meta has used a hire-team-without-buying-company model in some past deals, but this time it can't even keep the team. Letting the founders go effectively means dismantling the acquisition's core assets.
The two co-founders, Xiao Hong and Ji Yichao, were summoned by Chinese regulators in March and told they cannot leave the country. Xiao founded Beijing-based Butterfly Effect Technology in 2022, which developed the early version of Manus; later, a Singapore entity with the same name took over overseas operations. Last summer, after Manus received investment from Benchmark, most of its Chinese employees relocated to Singapore.
Manus investors, including Benchmark, have already recouped their returns. Asian investors such as Tencent, HSG, and ZhenFund have indicated they will cooperate if Meta proceeds with the dismantling.