USA Inbound Acquisitions & Investments Blog : Inbound Investment Lawyer & Attorney : Sullivan & Worcester Law Firm : Mergers & Acquisitions, Cross Border Investments

Under the pressure of the global economy, many Finnish companies have transferred manufacturing from Finland to China and to other countries with lower labor costs. Recently there has also been transfers of R&D. In many cases, the transfers are executed by incorporating a new company overseas, but also through acquisitions and joint ventures. On the other hand, many Finnish companies, especially the high-tech sector, have marketed, or at the very least targeted, their focus outside Finland. Consequently, it is common that Finnish companies have subsidiaries and joint ventures outside Finland.As mentioned earlier, there are practically no limitations regarding investments made from Finland and Finpro in assisting Finnish companies, especially small and medium size companies, to invest overseas. Finpro also has locations in the United States.

According to the statistics of the Finnish Venture Capital Association, in 2009 private equity firms located in Finland made investments to Finnish and foreign companies at the value of 362 million euros, nearly equaling the amount invested during 2008. The amount was invested to 230 different target companies in 350 transactions and the value per transaction increased compared to the previous year. 82 million euros out of 362 million were invested into 171 venture capital stage companies in 257 transactions and 280 million euros were buyout investments made to 59 target companies in 93 transactions. 14% of the amount invested went outside Finland and only 2% outside Europe. Even though Finland has several incentives available for all companies located in Finland, the government is not that active in investing. In 2009, the share of investments made by public sector was 6% of the entire amount invested and 5% of the transactions.

Finnish companies have also been quite active in acquiring foreign companies. In the beginning of 2000, the Finnish paper company Stora Enso acquired the U.S. company Consolidated Papers with 70% premium. This transaction was not a success story for the purchaser and the North American operations have already been divested. Nokia has been active in acquiring U.S. companies like Intellisync Corp, Loudeye Corp, Twango, Meta Carta Inc., Navteq and the latest acquisition Novarra Inc. The number of the acquired U.S.-based high-tech companies indicates the strength of the U.S. high-tech industry and the purchase price of Navteq amounting to 8.1 billion shows that it is not only nickels-and-dimes that are spent.

A special thanks to Ville Heikkinen, Sullivan & Worcester’s Finnish intern, for his assistance in preparing this post.

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Due to the limited size of the Finnish market, companies and entrepreneurs located in Finland have – from the very beginning – gone overseas to grow business. Also, the amount of capital available in Finland is limited and, especially in the areas requiring large investments like the mining industry, foreign investors are appreciated.

Investments made from Finland to other countries used to be regulated but several amendments of legislation during the 1980’s and in the beginning of the 1990’s have changed the environment. As of October 1, 1991, movement of capital to and from Finland have not been restricted. Restrictions regarding foreign ownership of Finnish securities have also been dissolved and from the beginning of 1993 there has been no restriction. Certain acquisitions of large Finnish companies may require follow-up clearance from the Ministry of Employment and the Economy in accordance with the Act on Control of Foreign Acquisitions of Finnish Companies. The purpose of the clearance is to protect essential national interests. However, except for those relating to money laundering, there are practically no legal obstacles to direct foreign investments in Finnish securities or exchange control regarding payments into and out of Finland.

The state owns portions of several Finnish companies, some publicly-listed, which are considered to be critical for the society or from the point of maintenance surety. The state, however, has no majority ownership in these publicly-listed companies and the government does not interfere to the day-to-day business in order to avoid reducing attractiveness in the eyes of other investors. Debate regarding areas where the state should keep its ownership is ongoing and every now and then the foreign ownership raises discussion. For example, the sale of the Finnish company responsible for national transmission and broadcasting networks, as well as for the radio and television stations, to the French company have raised some criticism. At the end of 2009, it was reported that the government has planned to acquire the ownership to the said networks to Finnish owners. Lately, there has also been some political activities regarding more efficient supervision of non-Finnish ownership in order to prevent takeovers on the areas and of the companies that are considered to be essential from the national and welfare perspective. The previous Minister of Labor of Finland sent a working group of officials to examine the above mentioned supervision but no proposal or conclusion of the working group has yet been reported.

For the purposes of promoting direct investments to and from Finland, two organizations have been established. Invest in Finland, a government agency promoting foreign investments into Finland and Finpro, an association founded by Finnish companies, aims to assist Finnish companies in their business activities outside Finland. So far, the net amount of capital flow has been negative for Finland, i.e., more investments and related capital transfers have been made from Finland than to Finland. 

A special thanks to Ville Heikkinen, Sullivan & Worcester’s Finnish intern, for his assistance in preparing this post.