Mergers And Acquisitions in Finland - 1. An Introduction

The effects of the world-wide recession and the sudden decrease in the Finnish export to Russia led to deep repercussions in Finland. Starting from a few years back the economy is, however, recovering. Especially the export industry has recovered, mainly due to the lower production costs which has brought competitiveness to the Finnish industry. The Government has succeeded in not increasing the public expenditure. Furthermore, starting from January 1, 1995, Finland has been a member of the EU.

One other feature deriving from the recession is, that companies increasingly have been interested in concentrating on their core businesses. The other side of the coin is obviously, that there might be interesting acquisition targets in Finland. The fact that the legal framework for mergers and acquisitions is being adapted to the international market, and the relatively low prices for shares on the Helsinki Stock Exchange may be additional issues to consider when choosing acquisition targets.


MERGERS

Finnish national mergers are allowed according to the Finnish Companies Act of 1978 (the "Companies Act"). International mergers are not recognised under the Companies Act. Three different types of mergers exist, i.e. a normal merger (a company is merged into another), a combined merger (a new company is formed to receive other companies) and a parent subsidiary merger.

In general, relevant company decisions shall be taken by the shareholders' meeting or by the Board in case of a parent subsidiary merger. The decisions shall be filed in the Trade Register, and the merger shall be authorised by the relevant court. The court decision must be filed in the trade register. The procedure lasts less than a year.


ACQUISITIONS

An acquisition of a Finnish company may be executed by a purchase of shares or an asset deal. If, as opposed to a purchase of shares, an asset deal is used, the liabilities of the selling company will remain with the seller. In an asset deal the actual object for the acquisition as well as the liabilities may be defined in detail.

A due diligence review of the acquisition target is more and more often carried out, also in domestic transactions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.