In Finland, the legal framework governing acquisitions varies depending on whether the target is a private or public company. Private transactions are primarily regulated by the general principles of contract law and to some extent by Limited Liability Companies Act offering flexibility in terms of negotiation, pricing, and confidentiality. In contrast, public company acquisitions are subject to a more stringent regime under securities law, including the Finnish Securities Markets Act, regulations issued by the Finnish Financial Supervisory Authority (FIN-FSA), and the EU Takeover Directive.
One of the key distinctions lies in the transparency of the process. Public transactions become publicly known once the offer is announced, triggering formal disclosure obligations such as offer documents, stock exchange releases, and board opinions.
While private transactions do not trigger statutory disclosure obligations in the same way, they often involve extensive due diligence and detailed contractual disclosures between the parties. The documentation remains confidential, allowing for greater privacy and limited stakeholder involvement. However, the level of disclosure in private deals can be substantial, especially in complex or high-value transactions.
In terms of deal mechanics, private acquisitions are generally fully negotiable, with flexible pricing and timelines, and no legal requirement to offer a uniform price. Public acquisitions, on the other hand, follow a regulated pricing structure and a prescribed timeline, including a mandatory acceptance period of at least 10 business days.
The documentation required for M&A transactions in Finland varies depending on whether the target is a private or public company, reflecting differences in regulatory oversight and disclosure obligations.
Private Transactions
In private deals, documentation is typically negotiated between parties and remains confidential. Common documents include:
Additional supporting documents may include transitional service agreements, employment agreements, shareholders’ agreement and necessary corporate resolutions.
This documentation is tailored to the specifics of the transaction and allows for a high degree of flexibility and privacy.
Public Transactions
Public company acquisitions are subject to stricter regulatory requirements and formal disclosure obligations. Key documents include:
These documents are designed to ensure transparency and protect shareholder interests. The offer document must contain sufficient information for shareholders to evaluate the bid and is made publicly available throughout the offer period.
In Finnish M&A practice, the disclosure of material facts is shaped by both legal obligations and market expectations. This creates a balanced framework where disclosure is both a legal safeguard and a practical necessity.
From a legal perspective, Finnish law recognizes both the seller’s duty to disclose and the buyer’s duty to investigate. The seller is expected to disclose material facts that could affect the buyer’s decision to proceed or the terms of the deal. Failure to do so may result in liability for misrepresentation or breach of warranty. Conversely, the buyer is expected to conduct reasonable investigations and cannot later claim damages for issues that were discoverable through proper diligence.
The scope of what is considered “material” is typically defined in the transaction documents and may be qualified by thresholds, knowledge qualifiers, or specific indemnities.
Regardless of whether the target is a public or private company, transactions typically involve extensive due diligence across multiple streams. These include:
Under Finnish law, a shareholder who acquires more than 90% of all shares and voting rights in a company becomes subject to a redemption obligation under the Companies Act. This means minority shareholders may demand redemption of their shares, and the majority shareholder may initiate a squeeze-out procedure.
In addition, if the target is a public company, the Securities Markets Act imposes a mandatory tender offer obligation when a shareholder’s voting rights exceed either 30% or 50%. The offer must be made to all remaining shareholders on equal terms and must include a cash consideration. The offer document must be approved by the Finnish Financial Supervisory Authority (FIN-FSA) and made publicly available for a minimum of three weeks and up to ten weeks. The offer may only be conditional on receiving necessary regulatory approvals.
In Finland, companies are typically acquired through a share purchase or through an asset purchase, where all or part of a company’s assets are purchased. Finnish law imposes generally minimal formalities on the parties. The transfer of shares or asset deals can be done by simple agreement and without the involvement of notary or authorities, except regulatory requirements or participation of authorities in certain assets, such as real property. Because of the simplicity and efficiency of share or asset deals, they hold predominant role in M&A activity in Finland.
SPAC transactions are still rather rare, and it remains to be seen whether this structure will gain more foothold. Other structures include mergers, share exchanges and joint ventures for example.
Parties most commonly use completion accounts or locked-box mechanisms. Earn-outs are also used, typically in smaller transactions.
The pricing of the mandatory takeover bid is regulated. In a mandatory takeover bid the consideration payable must be a fair price. Cash consideration must always be offered, but alternatively securities consideration, or a combination of securities and cash may be offered. The company’s management is required to act in equal interest of all shareholders, which in this context means seeking to maximize the consideration payable to them. All shareholders must be offered the same terms in compliance with the equivalent treatment principle.
Certain transactions must be notified to the Finnish Competition and Consumer Authority (FCCA), and the transaction is subject to a standstill obligation, meaning that it may not be completed prior to the authority’s decision. Notification duty is determined primarily by turnover. A filing is required where the parties’ combined worldwide turnover exceeds EUR 100 million and at least two parties each generate over EUR 10 million in turnover in Finland. Review timetables are case-specific, but most of the filings are cleared in the first phase in roughly a month from a complete notification. Public bids can be announced before competition clearance is obtained, but typically the bid is made conditional on receiving such clearance. Instead of national control, EU merger control may apply if the transaction meets the EU Merger Regulation thresholds.
Finland screens foreign corporate acquisitions under the Act on the Screening of Foreign Corporate Acquisitions in Finland (FDI). A foreign owner (outside of EU or EFTA) shall apply for advance confirmation from the Ministry of Economic Affairs and Employment (MEAE) for any corporate acquisition involving a defense industry company or a company that produces or supplies critical products or services related to the statutory duties of Finnish authorities essential to the security of society. The acquisition shall not be completed prior to obtaining FDI approval. MEAE can transfer the matter to the government plenary session for consideration if the acquisition could endanger a key national interest.
Material Adverse Change (MAC) clauses are frequently included in Finnish M&A agreements as conditions precedent to the buyer’s or the parties’ obligation to complete the transaction. Since Finnish law does not provide a statutory definition for MAC clauses, their scope and wording are subject to negotiation. Typically, these clauses cover significant changes in the target’s business, financial condition, or operations occurring between signing and closing—particularly when there is a time gap between the two.
Break-up fees are not commonly used in Finnish M&A practice. When applied, they are more typical in cross-border transactions and must be carefully structured to avoid potential conflicts with fiduciary duties or shareholder rights.
In Finnish M&A agreements, the concepts of “knowledge” and “materiality” are contractual qualifiers that must be clearly defined by the parties, as Finnish law does not provide statutory definitions for either term.
Negotiations typically focus on whether representations and warranties are given based on the seller’s actual knowledge or a broader constructive knowledge standard. Non-fundamental warranties are often qualified by materiality thresholds, which may also be linked to a material adverse effect clause. These qualifiers help allocate risk and clarify the scope of the seller’s liability.
Bring-down provisions are standard in Finnish M&A practice. These provisions require that the representations and warranties made at signing remain true and correct at closing. However, when signing and closing occur simultaneously—as is often the case in smaller transactions—bring-down provisions are typically unnecessary, and warranties are only given once.
In deals with a gap between signing and closing, it is common to include a condition precedent stating that there must be no material breach of the warranties during that period. This condition generally applies to non-fundamental warranties, while fundamental warranties are expected to be accurate in all respects at closing.
In Finland, the default legal principle leans toward anti-sandbagging, meaning prior knowledge typically defeats warranty claims unless the contract explicitly allows otherwise. That’s why Finnish agreements often define “knowledge” carefully and rely on disclosure materials to set the boundaries of what the buyer is deemed to know.
However, as such, pro-sandbagging clauses that allow the buyer to bring warranty claims despite any pre-signing knowledge are in principle enforceable as a matter of contract.
In Finnish M&A transactions, the full purchase price is typically paid at closing. However, escrow arrangements are also somewhat common. An escrow account is a financial arrangement where a portion of the purchase price or other funds is held by a neutral third-party agent until certain conditions are fulfilled. These conditions may include regulatory approvals, post-closing adjustments, or resolution of specific liabilities. Escrow agreements are contractual in nature and outline the terms for release of the funds, providing additional security and trust between the parties.
Further, the use of W&I insurance has increased in recent years in Finland, and it is particularly common among private equity investors.
In Finnish M&A transactions, it is standard practice for the seller to indemnify the buyer for losses arising from pre-closing issues or breaches of representations and warranties. This typically includes liabilities such as unreported tax obligations, pending litigation, or other risks identified during due diligence.
While Finnish law does not automatically impose indemnification obligations in share sales, it does allow the buyer to rescind the agreement under certain circumstances. As a result, purchase agreements often explicitly exclude the buyer’s right to rescind and limit compensation claims to those arising under the contract or from mandatory legislation.
In addition to general indemnities, specific indemnity clauses may be included to address known risks uncovered during the due diligence process. These clauses help allocate responsibility and provide targeted protection for the buyer.
The liability is often limited to reasonably foreseeable losses and by monetary caps, and the amount is construed as a reduction of the purchase price. A cap is often set at certain percentage of the purchase price. De minimis and basket are very common and in practice, used in all transactions.
Finnish law generally respects these contractual limitations, except in cases of bad faith, such as fraud or intentional misconduct. Courts or arbitral tribunals may adjust or disregard a provision deemed unreasonable, but such intervention is rare in practice when the parties’ intent is clearly documented.
In Finland, key areas of liability typically include tax, environmental, and employment matters. These are often addressed through specific warranties and indemnities in the share purchase agreement (SPA).
The Finnish Tax Administration may reassess corporate taxes up to three years after the relevant tax year. In asset deals, historical tax liabilities generally remain with the seller unless otherwise agreed. SPAs usually include comprehensive tax warranties covering the audit window.
In environmental related issues, liability follows the “polluter pays” principle. If the original polluter is unknown or insolvent, the current land possessor may be held liable. Buyers are responsible if they knew or should have known about the issue at the time of purchase. Environmental liabilities are strict and uncapped under Finnish law, though SPAs often set warranty and indemnity periods of 5–7 years.
In asset transfers, employees automatically transfer to the buyer with existing terms. Terminations solely due to the transfer are prohibited, and communication with employees is required. In share deals, employment liabilities remain with the company unless specifically covered by indemnities. Employment claims are subject to statutory limitation periods, typically ranging from two to five years.
The Finnish Debt Limitation Act sets a default three-year limitation for debts and claims, and a ten-year longstop for damages. However, special laws governing tax, employment, environmental, and product liabilities override these defaults. SPAs often include explicit limitation periods and longstop dates, which are enforceable unless they attempt to exclude liability for intentional wrongdoing.
In Finland, parties may choose a foreign governing law for their transaction documentation. However, it is common for deals involving Finnish entities (at least when there is a Finnish target) to be governed by Finnish law.
Civil judgments issued in foreign jurisdictions are not automatically recognized or enforceable in Finland. Recognition and enforcement require either an international treaty binding on Finland or specific provisions under national or EU legislation. Within the European Union, civil judgments are generally enforceable across member states.
Importantly, selecting a foreign governing law does not override Finnish mandatory rules. Regardless of the chosen law, Finnish legislation will continue to apply to areas such as taxation, competition, employment and the legal transfer of title.
In Finland, arbitration is widely preferred for resolving M&A disputes. It requires a separate written clause in the agreement and offers flexibility in choosing the seat, language, and expertise of the arbitral tribunal. Arbitration awards are generally enforceable internationally under the New York Convention.
Compared to court proceedings, arbitration is typically faster, confidential, and procedurally flexible, making it attractive for parties seeking discretion and efficiency. However, it is also more expensive, due to tribunal fees and administrative costs.
Court litigation remains relevant in situations requiring emergency relief, such as injunctions. Even when an arbitration agreement is in place, Finnish courts or authorities may issue interim measures within their statutory jurisdiction.
Ally Law is not a law firm. By providing information to Ally Law through this website or otherwise communicating information to Ally Law, you are not establishing an attorney-client relationship with Ally Law or with any independent local firms that participate in Ally Law. The information you provide us will not be afforded legal protection as an attorney-client communication. This means that while Ally Law will protect the confidentiality in accordance with the policy described above, the information you provide is not protected under the laws relating to attorney-client privilege, and Ally Law may be compelled to disclose information you provide in certain legal proceedings. Accordingly, you should not provide any information concerning your legal needs you wish to be protected by attorney-client privilege.
Rautatienkatu 21 C, 33100 Tampere,
Finland
Call: +358 10 2999 471
Kaivokatu 10, 00100 Helsinki,
Finland
Call: +358 10 2999 471
Anni Alamettälä
Managing Partner, Attorney at Law
Email: anni.alamettala@applex.fi
Call: +358 40 7236 899
Ella Lumio
Lawyer, Associate
Email: ella.lumio@applex.fi
Call:
+358 44 735 4965
