Energy & Infrastructure M&A 2024 Comparisons

The Finnish energy and infrastructure M&A market has experienced a slowdown over the past year due to the cautious approach of investors in the current economic climate. The energy industry is currently facing numerous challenges that impact the investment landscape, including lower-than-average electricity prices in Finland compared to other European markets, increased capital expenditure costs, and high interest rates driving up capital costs. These factors have collectively shifted the financing outlook for energy projects and may explain the lower-than-anticipated transaction volumes in the energy markets. The market is expected to recover gradually once interest rate reductions take effect and new investment decisions are made in the consumption and offtake sector, particularly in areas such as data centres and hydrogen production.

Finnish start-up entrepreneurs quite often set up Finnish companies. The establishment and registration of a Finnish limited liability company with the Trade Register typically takes from a few weeks to one or two months. Setting up a Finnish limited liability company is relatively easy, and no share capital is required for the purposes of establishment.

Tax analysis on choosing a specific type of entity needs to be conducted on a case-by-case basis. A Finnish limited liability company (corporation for tax purposes) can be considered to be the general starting point, but a limited partnership (transparent for tax purposes) may be preferred by certain investors – eg, tax-exempt funds or insurance companies eligible for beneficial tax treatment. Furthermore, it is recommendable to analyse in each case whether a Finnish mutual energy company, having the legal form of a limited liability company, could be utilised.

Roughly categorised, start-up companies in Finland seek funding from the following sources:

• private investors (angel investors);
• venture capital funds;
• crowdfunding;
• public funding options (eg, Centres for Economic Development, Transport and the Environment and Business Finland); and
• combinations of these entities.

The financing rounds are generally documented by terms sheets, shareholder agreements, investment agreements and convertible loan agreements (if provided in the form of convertible loan instruments), as well as related corporate legal documentation, such as shareholder and board resolutions.

In Pre-Seed, Seed and Series A funding rounds in Finland, the investors are often primarily domestic venture capital firms (with angel investors also investing in Pre-Seed and sometimes Seed rounds). The funding often comes from a combination of different sources, including government-sponsored funds. Foreign venture capital firms usually become more involved in Series A and subsequent financing rounds.

There are established – although evolving – market practices regarding the types of terms present in funding rounds, but the specific terms can vary significantly depending on the case. In the early stages, standardised legal documents of the Startup Foundation (founded by Finnish technology influencers, entrepreneurs and investors) are sometimes used. These are commonly referred to as “Finnish Series Seed documents” (inspired by the similarly named US-originating standard documents). However, especially in later rounds, new agreements are negotiated and must always be tailored to the specific situation.

Finnish start-up companies are usually established locally as limited liability companies; in general, they remain in the same corporate form as they advance in their development. Corporate restructuring processes are sometimes carried out to change a start-up company’s corporate domicile to the United States, but most companies generally remain as Finnish limited liability companies.

When comparing whether a start-up would choose either an IPO or a sale process when targeting a liquidity event, sales processes are often preferred due to the ease of the process and the possibility for complete exits. However, as the IPO market in Finland has developed favourably for growth companies, listings are also favoured when market conditions provide relevant valuations. Sponsor-driven growth companies often opt for dual-track processes when targeting liquidity events.

Finnish companies typically list on the home country exchange – ie, Nasdaq Helsinki. Listings on foreign exchanges have not been common and have had limited success due to a lack of investor attention on more international exchanges (apart from specific niche sectors, such as biotech). In addition, dual corporate governance and other regulatory requirements call for special attention when listing on foreign exchanges.

Dual-listings have also not been typical for Finnish companies, partly for the same reasons as for listings on foreign exchanges listed above. However, for certain sectors, such as biotech, a dual-listing may be a feasible alternative if there is a clear expectation on interest and attention in certain foreign exchanges for trading on the company’s shares. In a dual-listing, a Finnish company can typically continue to apply the Finnish corporate and securities market laws, but it may have to apply certain regulations of the foreign exchange as well.

If a company chooses to list on a foreign exchange, it would not typically affect the feasibility of a possible future sale. Regarding the redemption of minority shareholders, the Finnish company law provides that a shareholder with over 90% of all shares and votes has the right and obligation to redeem the outstanding shares in the company at a fair price. This provision would be applicable even when a Finnish limited liability company is listed on a foreign exchange.

In the sale of a privately held venture capital-financed company in Finland, a financial adviser/investment bank typically seeks to obtain initial bids from several potential purchasers, after which one party is chosen to proceed with the transaction.

In Finland, the typical transaction structure for the sale of a privately held company with multiple venture capital investors usually involves the sale of the entire company. There may be some optionality as to liquidity in some cases, but venture capital firms typically seek a full exit.

In Finland, the most common way to structure transactions involving the sale of privately held venture capital-financed companies is through a sale of the entire company for cash.

Typically, founders and venture capital investors are expected to stand behind certain representations and warranties, and to provide indemnities for breaches. The scope and duration of indemnities are typically negotiated and can vary.

It is customary in Finland to use escrow accounts or holdback mechanisms to secure indemnification obligations, especially in smaller deals or when there is a large number of smaller sellers. The amount and duration of the escrow/holdback are subject to negotiation but commonly range from 10% to 20% of the purchase price and last for 12 to 24 months.

The use of warranty and indemnity insurance is becoming increasingly common in Finland, especially in larger transactions or those involving international buyers and sellers.

Spin-offs do take place, typically in order to carve out a certain business line in relation to the reorganisation of a group structure or to enable the exit of the spin-off business.

Spin-offs can be structured as tax-free transactions if certain criteria are met. Fully tax-free transactions may be available if a full or partial demerger or transfer of business is carried out, both of which require share consideration (only a very limited cash component is allowed). VAT-exempt transfers of business may also be available against cash consideration, provided that a VAT-able business is continued by the acquirer. Except for a full demerger, the key criteria for tax exemption is that a business unit (ie, the spin-off business) must be transferred.

A restructuring that involves multiple transactions may be possible without adverse tax consequences, in which case the key requirement is that the restructuring is carried out for business purposes rather than to obtain tax benefits.

The typical timing for a demerger is four to six months (creditor protection period), but a transfer of business does not have a statutory time requirement. A ruling from a tax authority prior to completion is highly recommendable, and typically it would take approximately three to four months if no appeal to the Administrative Court is made.

Reporting Thresholds and Obligations

Stakebuilding refers to the process of acquiring shares in a company, often with the intention of gaining a significant minority position or preparing for a potential takeover bid. Acquiring a stake in a public company prior to making an offer is relatively uncommon in Finland.

Any holdings in a publicly listed company that reach, exceed or fall below the thresholds set in the Finnish Securities Markets Act (SMA) must be notified to the listed company and the Financial Supervisory Authority (FIN-FSA) without undue delay, and no later than the following trading day after the shareholder has learned or should have learned of the transaction. These reporting thresholds are set at 5%, 10%, 15%, 20%, 25%, 30%, 50%, ⅔ and 90% of the voting rights or shares in the company.

The notification obligation is triggered when the proportion of shareholdings or voting rights either reaches, exceeds or falls below said reporting thresholds; when calculated, it should also include holdings by any affiliated companies or a person acting in concert with the shareholder, as defined in the SMA. The obligation to notify applies to the highest body exercising control within the entire chain of control, meaning that all shares and voting rights held within a corporate group are aggregated when determining notification thresholds.

When calculating the actual threshold for triggering the notification obligation, the holdings are categorised by three different “baskets”:

• basket 1 consists of actual holdings of shares and/or voting rights;
• basket 2 consists of financial instruments that entitle the holder to acquire already issued shares (physically settled) or lead to an equivalent economic position (cash settled); and
• basket 3 consists of the aggregate amount of actual holdings and financial instruments (combining basket 1 and basket 2).

Disclosure of Intentions and Plans

The Helsinki Takeover Code 2022 sets forth certain disclosure obligations related to the bid process, and emphasises transparency and timely disclosure throughout the whole takeover process. Although there is no set obligation to disclose any intentions or plans before launching a public tender offer (PTO), once launched, any intentions or plans in relation to the bid process to take action, or not to take action, must be disclosed if such information is likely to influence the assessment of the takeover bid by the target company, holders of the target company’s securities or other investors. This includes information that the bid will not be increased, that the validity of the bid will not be extended, or that the offeror will not waive a certain offer condition.

The binding nature of the plans and intentions relates to the bid process only; it does not apply to, for example, any strategic plans disclosed by the offeror regarding the target company and its employees. Such plans shall be assessed on the basis of the prohibition on providing false and misleading information in the general principles of the SMA.

Time Period for Buyer to Confirm or Decline Proposal

At the request of the target company’s board of directors, the FIN-FSA can set a time period for anyone who has approached the target company or its shareholders about a potential takeover bid or has publicly announced plans to do so. The person must either publicly announce a takeover bid (put up) or confirm that they will not proceed with one (shut up) within the above-mentioned time period. The time period can be set if information of a potential takeover bid is likely to disrupt the normal functioning of the securities markets or interfere with the target company's business operations for an unreasonable amount of time.

If the takeover bid is not disclosed within the set time period, or if the person announces publicly that they will not make a bid, the person (or anyone acting with them) cannot launch a takeover bid for six months following the end of the time period or the public announcement.

In accordance with the SMA, the obligation to make a mandatory offer arises when a shareholder's voting rights in a company listed on a regulated market or a multilateral trading facility at the initiative of the issuer exceed either 30% or 50% of the total voting rights of the target company. Once this threshold is crossed, the investor is required to make a public offer to purchase the remaining shares of the company. This is intended to protect minority shareholders by ensuring they have the opportunity to sell their shares at a fair price.

However, it is worth noting that there is no obligation to make a mandatory offer when the securities that led to the threshold being exceeded were acquired in a PTO for all securities of the target company.

An acquisition of a public company can be carried out either through a PTO or through a statutory merger. A PTO is either mandatory (see 6.2 Mandatory Offer) or voluntary. A shareholder with over 90% of all shares and votes has the right and obligation to redeem the outstanding shares in the company at a fair price.

In recent years, it has become quite common in Finland for a public company to be acquired by means of a merger. A merger must be approved by the general meeting of the merging company by a majority of two thirds of the votes cast and of the shares represented at the meeting; if there are several share classes, it must also be approved by a majority of two thirds within each of the share classes represented at the meeting. Typically, the merger is also resolved upon by the general meeting of the acquiring company, even though in some cases the board of directors could resolve on the merger pursuant to the Finnish Companies Act. The merger process is strictly regulated by the Finnish Companies Act, and thus all requirements regarding, for example, the timeframes must be followed.

Public Tender Offer

With regard to a mandatory takeover bid, the consideration shall be an equitable price. As an alternative to cash consideration, a consideration may be in the form of securities or in the form of a combination of securities and cash. In determining an equitable price, the starting point must primarily be the highest price paid by the offeror during the six months preceding the arising of the obligation to launch a bid (see 6.2 Mandatory Offer). If the party under the obligation to launch a bid has acquired securities subject to the bid not within such timeframe, the starting point for the determination of an equitable price shall primarily be deemed to be the average of the prices paid for the securities subject to the bid in trading weighted by the volume of the trade during the three months preceding the arising of the obligation to launch a bid.

In a voluntary takeover bid, the consideration offered may be paid in cash or securities, or as a combination of these. The SMA sets forth certain situations where a cash consideration must be offered at least as an alternative – for example, when the securities offered as consideration are not traded on a regulated market or on a multilateral trading facility at the initiative of the issuer. Furthermore, if a voluntary takeover bid is made for all the shares and securities issued by the target company, the starting point for determining the consideration shall primarily be the highest price paid by the offeror during the six months preceding the announcement of the takeover bid.

In a majority of the PTOs in Finland, the consideration has been paid in cash. The industry or sector in which the target company operates does not typically affect the form of consideration.

Merger

Typically, the merger consideration is paid in shares (ie, the shareholders of the target company receive shares in the other company). Although the Finnish Companies Act sets forth that the merger consideration may also consist of cash, other assets and commitments, these forms of consideration have rarely been used in the Finnish market.

The merger consideration is defined in the merger plan signed by the boards of directors of the acquiring company and the merging company.

Finnish tender offers typically include conditions such as a minimum acceptance rate (often over 90% due to compulsory redemption proceedings) and receipt of regulatory approvals from, for example, FDI and competition authorities. Other customary conditions typically include the following:

• no material adverse change has occurred after the announcement;
• no authority or court decisions have been given and no other legislation has been issued that would prevent, postpone or frustrate the completion of the tender offer;
• the board of directors of the target company has issued its recommendation to the shareholders to accept the offer and the recommendation remains valid; and
• the combination agreement entered into by the offeror and the target has not been terminated.

As regards regulators, the FIN-FSA has stated in its guidelines that the offeror shall not invoke a condition to the completion of a tender offer unless the non-fulfilment of such condition has a material impact for the offeror in view of the tender offer, as such action by the offeror would frustrate or materially impede the implementation of the tender offer, which is prohibited under the SMA. Furthermore, the FIN-FSA monitors the equal treatment of shareholders of the target by the offeror, among other things.

It is customary for the offeror and the target to enter into a combination agreement in connection with a public takeover. In such agreement, among other items, the target gives certain customary representations and warranties as well as covenants concerning conduct of business.

Generally, it is appropriate for the target to undertake to:

• inform the offeror of any possible competing offers;
• provide the offeror with an opportunity to improve their offer terms, including the offer price, in case of a superior competing offer (matching right);
• reimburse the offeror for certain documented expenses and costs following a termination of the combination agreement under certain circumstances (break fee); and
• refrain from actively soliciting or initiating any competing offers (non-solicitation).

Similarly, a combination agreement is typically signed between the merging company and the acquiring company in connection with a merger.

Tender offers in Finland typically introduce a minimum acceptance condition of more than 90%. A shareholder holding more than 90% of all the shares and votes in a company (excluding any treasury shares) has the right to commence compulsory redemption proceedings in accordance with the Finnish Companies Act, thus fully acquiring all the shares and votes in a company.

Certain tender offers have introduced lower minimum acceptance conditions, such as more than two thirds, more than 50% and even more than 40%. Such situations have, however, usually included multiple competing bidders or they have been opportunistic with relatively low premiums resulting in a weak preliminary result. In such cases, the initial minimum acceptance condition of more than 90% has consequently been adjusted to lower levels following competing bids or a weak preliminary result. See also 6.11 Additional Governance Rights on the governance rights the bidder can obtain with a 50% holding and with a two-thirds holding in the target company.

A shareholder who holds more than 90% of a company’s shares and voting rights is entitled to redeem the remaining shares at the fair price (squeeze-out). A minority shareholder whose shares are eligible for redemptions has a corresponding right to demand that the majority shareholder, who holds more than 90% of a company’s shares, redeem their shares (sell-out).

The redeemer must promptly notify the company of the commencement and termination of the rights of squeeze-out (and sell-out). The company, in turn, must register this information with the Finnish Trade Register.

If the above-mentioned ownership threshold is intended to be reached in connection with a PTO, the offeror must disclose in the offer documents any potential intention to demand a squeeze-out of minority shares. If the intention is to initiate a squeeze-out, the offeror must demand a squeeze-out without undue delay upon reaching an ownership of more than 90% of the shares and voting rights in the target company.

Squeeze-out is generally a rather technical and time-consuming process due to the numerous legal and administrative steps required for its completion. This includes, for example, meticulous documentation, communication with minority shareholders, and an arbitration proceeding.

Before launching a tender offer, an offeror must ensure that it is able to fulfil any cash consideration or, if any other type of consideration is offered, take all reasonable measures to secure the implementation of such consideration. Where cash consideration is used, the requirement entails that sufficient cash funds are at the offeror’s disposal or that the offeror has agreed on financing agreements for the completion of the offer with sufficient certainty (ie, the finance provider cannot unilaterally withdraw from the agreement). However, the offeror does not need to have the funds in its possession at the time of launch, and a potential financing agreement may be conditional upon, for example, the offer being completed in accordance with its terms.

Notwithstanding the above, a voluntary tender offer can be conditional upon the availability of financing up and until the time of completion, whereas a mandatory tender offer may only be conditional upon obtaining necessary regulatory approvals.

See 6.6 Deal Documentation.

Tender offers in Finland typically introduce a minimum acceptance condition of more than 90% due to the subsequent right to commence compulsory redemption proceedings and to fully acquire all the shares and votes in the company (see 6.7 Minimum Acceptance Conditions). If they are unable to obtain 100% ownership of a target company (ie, more than 90% of the shares and votes in the tender offer process), the bidder would still have certain governance rights in the target with at least a 50% stake in the company.

Resolutions at the general meeting generally require the approval of the majority of the votes cast. However, certain resolutions relating to, for example, amending the Articles of Association, a directed share issue or, in certain cases, a merger or demerger, require a majority of two thirds of the votes cast and of the shares represented at the general meeting. Therefore, a bidder having at least 50% of the votes cast could, for example, decide on the composition of the board of directors of the company; with an ownership of two thirds, the bidder would have even broader decision-making power at the general meeting.

The offeror often seeks to obtain irrevocable commitments from major shareholders of the target company to accept the takeover bid in order to increase deal security. Such irrevocable commitments are typically conditional – ie, in certain situations, it is possible for the shareholder to accept a potential better offer. It is also typical to obtain irrevocable commitments from shareholders of the target company in connection with a merger to vote in favour of a merger at the general meeting of the target company.

It should be noted that the provisions of the Market Abuse Regulation ((EU) No 569/2014) (MAR) on the unlawful disclosure of inside information and market soundings must be taken into account in connection with discussions with major shareholders.

Approval of the Offer Document

Prior to the commencement of the offer period, the offeror shall make available to the public an offer document containing relevant information on the offer. The offer document may be published once it has been approved by the FIN-FSA. The FIN-FSA has five business days from receiving the offer document to decide whether it can be published or if amendments are required.

The FIN-FSA shall approve the offer document if it contains essential and sufficient information to enable the shareholders of the target company to make an informed assessment of the offer. As long as adequate information to assess the offer is disclosed, the FIN-FSA rarely questions the offer price or the terms and conditions of the offer, provided that these do not include any unlawful conditions nor contravene the equal treatment of shareholders. If a tender offer is made by a consortium, it is necessary to have preliminary discussions with the FIN-FSA in order for it to review the offer terms and consortium structure in detail.

Timeline of the Offer

The statutory limitations to the offer timeline mainly relate to the length of the offer period. As a starting point, the offer period during which shareholders in the target company may accept the offer must be at least three weeks and at most ten weeks. In some instances, such as when necessary regulatory approvals are pending or a competing offer is published, the offer period may be extended to run for longer than ten weeks, provided that the day-to-day business of the target company is not disrupted for an unreasonable period of time.

In general, the offer period during which shareholders in the target company may accept the offer must be at least three weeks and at most ten weeks (see 6.13 Securities Regulator's or Stock Exchange Process).

According to the FIN-FSA’s interpretation, if, for example, the implementation of the bid requires the permission of a competition authority, the offeror shall extend the offer period until the authority has processed the matter and the offeror has had the possibility to assess the impact of the possible conditions included in the permission. Pursuant to the FIN-FSA’s guidelines, the offer period may be extended either so that it continues until further notice or so that it ends on a specified date, at least two weeks after the announcement of the extension of the offer period.

The FIN-FSA recommends that the offeror commences the bid procedure within a reasonable period following the publication of the takeover bid, which in voluntary cash bids is considered to be within a month of the publication of the takeover. Typically, the parties commence the preparation of the competition authority filings as soon as possible after the announcement of the bid. As the bid procedure should be commenced relatively quickly after the announcement, the regulatory approvals are not typically obtained prior to the launch of the bid.

In general, setting up and starting to operate a new company in the energy and infrastructure industry is not subject to any specific regulations, but certain operations could require specific permits or licences, with the following examples.

Natural gas and electricity grid networks located in Finland require licences from the Finnish Energy Authority. The permitting process is likely to take several months.

Nuclear power operations are subject to various permits and licences from the government of Finland and the Finnish Safety and Chemicals Agency (Tukes), for example, and the permitting process typically takes several years. Renewal of nuclear legislation is underway to enable the construction of small modular reactors (SMRs) with lighter permitting processes in the future.

In addition, the development of offshore wind power in the exclusive economic zone will require an exploitation permit granted through an auction process arranged by the Finnish Energy Authority. The related new act is expected to enter into force in early 2025.

The FIN-FSA is the primary securities market regulator in Finland. It monitors, inter alia, compliance with the SMA's provisions on takeover bids and approves the offer document (see 6.13 Securities Regulator's or Stock Exchange Process). In statutory mergers, the FIN-FSA approves the merger prospectus, which shall be available for the shareholders of the company prior to the general meeting resolving on the merger.

The Finnish screening mechanism allows the Finnish government to monitor and, if very important national interest so requires, to limit the shift of influence to foreign acquirers in monitored businesses. The screening is governed by the Act on the Monitoring of Foreign Corporate Acquisitions in Finland (172/2012, as amended – “Monitoring Act”) and conducted by the Ministry of Economic Affairs and Employment (“Ministry”).

Mandatory and suspensory filing to the Ministry is required to be made by a foreign acquirer who acquires a defence sector (including dual-use) enterprise or a security sector enterprise. If a foreign acquirer acquires a so-called other critical enterprise, no mandatory filing is required prior to closing. In practice, however, the Ministry’s approval is typically sought prior to closing for deal security, and also with respect to the so-called other critical enterprises.

The concepts of the monitored entities are determined in broad terms, intentionally leaving room for interpretation to accommodate the prevailing circumstances in the society at a given time.

• Defence sector entities include entities that produce or supply defence equipment or other products or services that are important for the national military defence, or that produce dual-use products in Finland or use dual-use technology in their operations in Finland.
• Security sector entities include entities that produce or supply to any Finnish authorities that are essential in terms of security of society any products or services that are critical for the statutory duties of such authorities.
• Other critical entities include entities that, based on their field of industry, business or commitments, taken as a whole, are considered critical for the vital functions of society. These include activities such as energy production and distribution networks, as well as the construction and maintenance of infrastructure.

The filing is made by the foreign acquirer gaining control of at least 1/10, 1/3 or 1/2 of the aggregate number of votes conferred by all shares in the company, or a corresponding actual influence. In the defence sector, monitoring covers all non-Finnish acquirers, while in other sectors (ie, the security sector and other critical enterprises), monitoring only concerns non-EU/EFTA acquirers. These also include acquirers domiciled in Finland or EU/EFTA if a non-Finnish or non-EU/EFTA person or entity holds at least 10% of the votes or corresponding actual influence in the acquirer.

In addition, foreign real estate acquisitions are governed in Finland by a separate permit procedure based on the Act on Transfers of Real Estate Requiring Special Permission (470/2019, as amended). The following buyers must seek a permit from the Ministry of Defence prior to purchasing real estate:

• a private individual who does not have a nationality in the EU or the EEA;
• a company or other entity domiciled outside the EU and the EEA; and
• a company or other entity domiciled in the EU or the EEA, but in which a private individual or entity referred to in the previous two points holds at least 10% of the votes or a corresponding actual influence in the company or other entity.

Please see 7.3 Restrictions on Foreign Investments regarding the national security review of acquisitions.

There is a separate export control framework in place. The Ministry of Foreign Affairs is responsible for export control concerning dual-use items and technology under statutory supervision. Export control is regulated by the Act on the Export of Dual-Use Items (500/2024) and Regulation (EU) 2021/821 of the European Parliament and of the Council. According to the regulations, the export of dual-use items outside the EU is subject to authorisation by the Ministry of Foreign Affairs. Authorisation for extremely sensitive items, such as nuclear materials and equipment, is also required for exports within the EU.

The Ministry of Defence is responsible for the control of defence materiel exports. The applicable regulation is the Act on the Export of Defence Materiel (282/2012, as amended), and the defence materiel it applies to is listed in Commission Directive (EU) 2016/970 regarding the list of defence-related products. A licence from the Ministry of Defence is always required when exporting, transferring, transiting or brokering defence materiel. The assessment is done on a case-by-case basis and a licence is granted if the activity is in line with Finland’s foreign and security policy and does not compromise Finland’s security.

The National Police Board is responsible for the export of firearms and cartridges for civilian use.

The relevant merger control rules are included in the Competition Act (948/2011, as amended). The Finnish merger control thresholds are turnover-based, and a notification must be made to the Finnish Competition and Consumer Authority (FCCA) prior to implementing the concentration if:

• the combined Finnish turnover of the undertakings involved exceeds EUR100 million; and
• each of at least two of the undertakings involved has Finnish turnover exceeding EUR10 million.

The turnover of the whole buyer group will be taken into account when calculating the relevant turnovers, whereas only the amount relating to the target is relevant for the seller group.

The definition of “concentration” covers:

• acquisitions of control;
• acquisitions of the whole or part of the business of an undertaking;
• mergers; and
• creations of a joint venture performing all the functions of an autonomous economic entity on a lasting basis.

The FCCA does not have the power to require notification of concentrations that do not meet the above-mentioned thresholds. In addition, if the EU merger thresholds are met, regardless of whether the national Finnish thresholds are also triggered, the transaction must be notified to the European Commission, which has exclusive competence to review concentrations with an EU dimension.

In Finland, works councils are not established by labour law or collective agreements, but all employers with at least 20 employees are within the scope of application of the Co-operation Act, the purpose of which is to promote co-operation between employers and employees. The act provides mandatory information and consultation obligations for employers, including an obligation for employers and employees to engage in continuous dialogue about the company’s financial situation, workplace practices, personnel needs and well-being at work.

In addition, before making significant decisions, such as workforce reductions, employers must consult with employees or their representatives. The act includes formal requirements regarding the process, timing and duration of such negotiations. In the negotiations, the employees are represented by their shop steward or an elected representative. If no representatives have been elected, all employees concerned are included in the negotiation process. No decisions (including those of a foreign parent entity, for example) can be made before completion of the change negotiations, nor even indirect acts implying that a decision has been made. Once the consultation obligation has been fulfilled, the company may decide on the implementation of its plans, irrespective of the opinion of the employees.

The Co-operation Act also includes provisions on employee representation in the company’s administration. If the employing entity has at least 150 employees, the employees have the right to request representation in the employer’s administrative bodies, which cover all of the employer's business units and deal with important issues concerning business, finances and the position of the personnel.

Representation in administration shall primarily be agreed between the employer and employees. If an agreement is not reached, employees shall be entitled to appoint representatives to the administrative board, board of directors, or such management teams or equivalent bodies, which together cover all of the employer's business units.

M&A transactions in Finland do not require approval from the central bank. Furthermore, M&A transactions are not subject to currency control regulation.

M&A disputes are typically handled through arbitration, so the court praxis is limited. Most significant legal developments in Finnish energy and infrastructure M&A relate to sector-specific legislation reforms or new regulation being implemented. There are several ongoing legislative initiatives aiming to promote, for example, green transition, smooth permitting of energy projects, offshore wind power, electricity markets and grids, hydrogen and SMRs.

One such initiative concerns the promotion of green investments through a new state aid. The Finnish government has released a draft Government Bill on a tax credit for major investments supporting a climate neutral economy. State aid in the form of a tax credit is enabled by the European Commission's Temporary Crisis and Transition Framework. For investments within the scope of the proposed legislation, the tax credit is 20% of the qualifying investment costs and a maximum of EUR150 million per group of companies. The amount is credited from taxes starting from 2028 at the earliest. The annual credit cannot exceed 10% of the total tax credit and the credit can be used over a maximum of 20 years. The investment needs to be a new investment in projects that relate to:

• renewable energy production (including hydrogen and hydrogen fuels, but renewable electricity production would be excluded);
• the storage of electricity and heat, or of renewable hydrogen, biofuels, bioliquids, biogases and biomass fuels;
• the decarbonisation of industrial production processes and energy efficiency measures; or
• the production of equipment (eg, batteries), key components and related critical raw materials essential to the transition to a net-zero economy.

Pursuant to the Helsinki Takeover Code 2022, if the board of directors of the target company has received a proposal on a takeover bid of a serious nature that the board deems to be in the interests of the shareholders, the board of the target company shall allow the offeror, upon request, to conduct a due diligence review of the target company. The scope of the due diligence review has to be assessed on a case-by-case basis. If the board of directors decides to allow a due diligence review, the offeror and the target company should enter into a non-disclosure agreement before the review is started.

If the offeror and the company are competitors, the provisions of competition law may impose restrictions on the information that can be shared with the bidder. In such cases, sensitive information could be shared, for example, by means of a clean team arrangement so that sensitive information is disclosed only to advisers or to a limited number of company representatives.

As a general rule, the target company is not required to disclose to the markets information disclosed to the offeror in the due diligence process. If the due diligence review reveals an essential fact not previously known to the target company, the board of directors of the target company must, without delay, make an assessment on whether the fact constitutes inside information and should thus be published as a stock exchange release. Even if the information provided to the offeror in the due diligence review is not inside information, the board of directors of the target company should assess whether the information may be relevant to the assessment of the merits of the bid and whether it therefore needs to be disclosed.

There are no specific restrictions that would limit due diligence of an energy and infrastructure company, but the General Data Protection Regulation and national privacy laws (namely the Act on the Protection of Privacy in Working Life) must be observed, similarly to any other due diligence work. In practice, this means redacting personal data from reviewed documents and not disclosing or sharing personal data of employees until very close to or only after closing.

A voluntary bid is initiated at the discretion of the offeror and is not triggered by any specific thresholds of shareholding. The obligation to disclose information about the bid and “go public” therefore arises directly upon the decision of the offeror and must be disclosed without delay and communicated to the target company in accordance with the SMA.

On the other hand, in a mandatory bid, the party required to make a mandatory bid must promptly disclose the arising of the obligation to launch a bid. The obligation to make a mandatory bid arises when a shareholder's voting rights in a company listed on a regulated market or a multilateral trading facility at the initiative of the issuer exceed either 30% or 50% of the total voting rights of the target company. The party obliged to make a mandatory bid must publish the bid within one month from the arising of the obligation to launch a mandatory bid. The takeover bid procedure following the exceeding of either threshold must begin within one month from the mandatory bid being published.

In relation to making a bid public, the offeror must also publish and make available to the public an offer document that includes essential and sufficient information to assess the favourability of the bid. This offer document may be published once it has been approved by the FIN-FSA.

The disclosure of a takeover bid must be disclosed in a manner ensuring fast and non-discriminatory access to the information in accordance with the SMA. The offeror’s decision to make a takeover bid must also be reported to the stock exchange.

A prospectus prepared in accordance with the EU Prospectus Regulation and related delegated acts is typically required for the issuance of shares in a stock-for-stock takeover bid, and for a business combination conducted by means of a merger.

In relation to cash takeover bids, the offeror must prepare and make available to the public an offer document that includes essential and sufficient information to assess the favourability of the bid. The offer document shall be prepared in accordance with the SMA and the respective Decree of the Finnish Ministry of Finance (1022/2012).

Both the prospectus and the offer document shall be published once the document has been approved by the FIN-FSA.

Pro forma financial information is typically required in prospectuses prepared for stock-for-stock takeover bids and for business combinations conducted by means of a merger. Pro forma financial information is usually prepared in accordance with the same accounting standards as the target company prepares its financial reports.

The offer document to be prepared in connection with cash takeover bids is not required to include any pro forma financial information.

The combination agreement agreed in connection with a voluntary tender offer or a merger is typically not made available to the public. The merger plan signed by the merging company and the acquiring company is published in connection with the announcement of the merger and filed with the Finnish Trade Register.

In general, the role of the board is evaluated in light of the general principles of company law: the management of the company (including the board of directors) must act with due care and promote the interests of the company and its shareholders.

For example, according to the preliminary work on the Finnish Companies Act, the company’s management has an obligation to achieve the best outcome for shareholders in a merger or takeover bid. In merger negotiations, this means gaining the most beneficial merger consideration possible; in the case of a takeover bid, it means taking the actions necessary to achieve the best possible offer (including the evaluation of the company’s options). The board should acquire sufficient information as the basis for its evaluation and make an assessment as to whether external advisers are needed.

In a public takeover, the board of directors of the target company must prepare and publish a statement on the public takeover bid (see also 11.4 Independent Outside Advice). In its statement, the board must recommend either acceptance or rejection of the bid. This statement often has a material impact on the completion of the bid.

In a merger, the boards of directors of the merging and acquiring companies shall prepare a merger plan, which will be published and registered with the Trade Register.

In addition, the board shall assess the terms of the combination agreement, which is typically entered into both in a voluntary PTO and in a merger (see also 6.6 Deal Documentation).

In addition to permanent committees of the board, the board of directors can set up ad hoc committees for the preparation of specific matters. Such committees are often established for the purpose of preparing for a major business transaction or in the event of some of the directors having conflicts of interest. The board committees do not have independent decision-making authority, so their role is limited to assisting the board in the preparation of the decision-making.

The board must act with due care and promote the interests of the company and its shareholders, so it is also expected to be actively involved in the M&A transaction process. Typically, the chair of the board and/or certain appointed board members participate in the negotiations of an M&A transaction. Please see 11.1 Principal Directors' Duties regarding the board’s other duties in a business combination.

The board of directors of the target company often requests an external financial adviser to provide a fairness opinion to assess the fairness of the consideration offered. Typically, the fairness opinion is published in connection with the announcement of the PTO or a merger.

The board of directors of the target company shall prepare and publish a statement on the public takeover bid, but the board should not base its statement merely on the fairness opinion prepared by an external adviser.