How to Minimize Negative Impacts of FDI Reviews to M&A Processes
Nuutero, Anniina (2024)
Nuutero, Anniina
2024
Tuotantotalouden DI-ohjelma - Master's Programme in Industrial Engineering and Management
Johtamisen ja talouden tiedekunta - Faculty of Management and Business
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Hyväksymispäivämäärä
2024-03-05
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:tuni-202402092226
https://urn.fi/URN:NBN:fi:tuni-202402092226
Tiivistelmä
Foreign direct investment (FDI) has been discussed in literature already for more than half a century and has been an interest of many researchers since then. Even though FDI is often considered good for the host country, many countries have felt a need to protect themselves from uninvited FDI. The most common reasons for countries to restrict incoming FDI are security of the state and security of supply. In addition, many countries have other things which they consider so material, that they want to monitor or restrict FDI related in certain industries or areas. Also, recent geopolitical events, such as COVID-19 and the ongoing war in Ukraine have increased many countries’ concerns related their security and security of supply and self-sufficiency overall, and therefore many countries have amended or established or are considering amending or establishing their FDI legislations.
Scientific literature regarding FDI focus mainly on effects of FDI to home and host countries and FDI as a way to develop companies and their operations. Scientific literature regarding FDI’s impact on M&A transaction processes could not been found and it is overall difficult to find information on how regulation of FDI impact M&A transactions. In addition, as FDI regulation changes rapidly, there is even less chances to find up-to-date information on their impacts to markets. In recent years FDI regulations have emerged more and more in publications of law firms, who help transaction parties of M&A transactions to navigate the world of evolving and increasing FDI regulations.
This study aims to tie closer the gap between existing literature and publications of non-academic parties, i.e., law firms, who are constantly involved in FDI review processes. This study aims to provide an up-to-date view of current condition of FDI legislation and its impact to M&A transactions and to analyse how currently known risks related to M&A presented in existing literature relate to FDI reviews. In addition, this study aims to provide tools to better manage M&A transactions which might involve FDI reviews
Two research questions of this study are “What kinds of negative impacts FDI regimes impose to M&A transactions?” and “How to minimize such negative impacts?”. This study was conducted as a cross-sectional concurrent embedded mixed method documentary research where recent FDI related publications of ten globally largest law firms were analyzed as secondary data and supported by literature review.
The results of this study revealed, that FDI regimes impose negative impacts to M&A transactions, which include increased risks, such as financial, operational, market and regulatory risks, increased transactions cost and risk of a deal falling apart or becoming non-attractive due to adverse decision of an FDI authority. According to our empirical findings, the most recommended ways to take into account FDI reviews in M&A transactions and to minimize negative impacts of FDI reviews to M&A transactions is to be aware of different FDI regimes. This also means, that need for FDI approval should be considered and assessed as early in the process as possible and relevant advisors should be involved from the beginning.
Scientific literature regarding FDI focus mainly on effects of FDI to home and host countries and FDI as a way to develop companies and their operations. Scientific literature regarding FDI’s impact on M&A transaction processes could not been found and it is overall difficult to find information on how regulation of FDI impact M&A transactions. In addition, as FDI regulation changes rapidly, there is even less chances to find up-to-date information on their impacts to markets. In recent years FDI regulations have emerged more and more in publications of law firms, who help transaction parties of M&A transactions to navigate the world of evolving and increasing FDI regulations.
This study aims to tie closer the gap between existing literature and publications of non-academic parties, i.e., law firms, who are constantly involved in FDI review processes. This study aims to provide an up-to-date view of current condition of FDI legislation and its impact to M&A transactions and to analyse how currently known risks related to M&A presented in existing literature relate to FDI reviews. In addition, this study aims to provide tools to better manage M&A transactions which might involve FDI reviews
Two research questions of this study are “What kinds of negative impacts FDI regimes impose to M&A transactions?” and “How to minimize such negative impacts?”. This study was conducted as a cross-sectional concurrent embedded mixed method documentary research where recent FDI related publications of ten globally largest law firms were analyzed as secondary data and supported by literature review.
The results of this study revealed, that FDI regimes impose negative impacts to M&A transactions, which include increased risks, such as financial, operational, market and regulatory risks, increased transactions cost and risk of a deal falling apart or becoming non-attractive due to adverse decision of an FDI authority. According to our empirical findings, the most recommended ways to take into account FDI reviews in M&A transactions and to minimize negative impacts of FDI reviews to M&A transactions is to be aware of different FDI regimes. This also means, that need for FDI approval should be considered and assessed as early in the process as possible and relevant advisors should be involved from the beginning.