Insights, News/14 Apr 2022

All Eyes on the United States

Time for investment plan transformation

At the end of 2021, the world was preparing for a recovery from the COVID-19 pandemic. Despite the surge in global inflation caused by lingering supply chain disruptions and labor shortages, leading investment banks expected a 4.7% increase in global GDP in 2022, and the euro area[1] seemed to be on track to recover to pre-pandemic levels. However, the outbreak of war in Ukraine disrupted the positive outlook and highlighted some of the existing issues (as explained further in this article), changing the context in which businesses make their investment plans.

As a result, the United States has regained its appeal. Many companies in Finland and elsewhere in Europe are currently looking into the U.S. markets in search of both investment and acquisition opportunities. As the world’s single largest economy, the United States accounts for approximately 20% of global output and for a third of global stock market capitalization. For many, the prospect of a large homogenous market and stable society are the key drivers for entry into the United States.

Russia and China: appeal for foreign investments fades

The war has caused many companies to withdraw from Russia and halt their investment plans in a short period of time, isolating the country from Western markets. At the same time, it has also had an impact on other countries, such as China, and highlighted the importance of geopolitical stability. Before the war, many businesses considered China a viable option for expansion due to its strong economic growth in the past years. In fact, based on a June 2021 survey by the European Union Chamber of Commerce, as many as 59% of European companies were considering expanding their operations in China.

However, the war in Ukraine has highlighted the fact that trade and foreign policy can no longer be separated. Investors are concerned about politicization of the business environment in China, such as consumer boycotts and sanctions imposed by the EU in response to human rights abuses, which are especially worrying in light of the new geopolitical tensions. These concerns, together with the latest Covid-19 wave and continuing supply chain disruptions, have made businesses more hesitant about increasing investments in China.

Europe and Finland feel the impact

The war in Ukraine has also changed the outlook on recovery and economic growth in Europe. Some investors fear that in the short-term Europe, including Finland, is becoming less desirable for investments:

  • Investment environment and stock markets. The proximity of Europe, and especially Finland, to Russia has made certain investors cautious. In Finland, this is reflected especially in foreign investments into companies listed on Nasdaq Helsinki, certain commercial real estate investments and private acquisitions. In February 2022, the amount withdrawn from investment funds registered in Finland increased to almost EUR 850 million from EUR 226 million in January 2022. In March, the total amount of new capital investments into the funds turned positive but was only a humble EUR 11 million. The decrease in the fund investments reflects the concerns of investors alongside the general decline in equity markets during Q1 2022.While the STOXX 600 index, which represents European stocks, plunged following the outbreak of war, it has climbed back to its prewar level. Nasdaq Helsinki has witnessed increased uncertainty for Finnish listed companies, in particular those with operations in Russia. Although Nasdaq Helsinki has already recovered almost to the level immediately preceding Russia’s invasion, volatility remains high and could be further influenced by Finland’s possible NATO application. While the application may provoke a reaction from Russia, NATO membership could have a stabilizing effect on the stock markets in the long run.
  • Supply chain disruptions. Before the outbreak of the war in Ukraine, supply chains were showing signs of recovery in many parts of the world. However, many countries are now facing new challenges as their supply chains are dependent on exports from Russia. In addition, the majority of rail freight from China to Europe travels through Russia. Rail freight volumes from China to Europe have grown rapidly over the past few years, last year alone accounting for 15,000 trips, a 22% year-on-year increase. Accordingly, this will no longer be a viable option for globally operating companies.
  • Sanctions and inflation. Since the outbreak of the war, the United States and the European Union have imposed numerous sanctions on Russia. Inflation was already expected to be higher in 2022 than in the past two decades, but the outlook for inflation has changed with the inception of the war. The sanctions could potentially add an extra 1.25% to inflation in Europe and reduce growth over 0.5% and overall the war can result in an additional 2.03% inflation in the Euro area. This can be explained by the fact that supply lines are disturbed and supplies are depleted while demand remains at the same level or grows. Increase in inflation is especially likely if energy exports from Russia cease completely. Currently, the impact on inflation in the United States is expected to be smaller at an additional 1.36%.
  • Russia as a trading partner. In 2020, Russia represented 5.2% of Finnish exports. In that year, Finland’s largest trading partner was the European Union at almost 60% of the total trade in goods, while the United States accounted for 8.5% and China for 5.7%. The war will nearly stop all trade with Russia at both the European Union level and Finland. Further, in a survey conducted by the Finnish Chamber of Commerce, 87% of the respondents expected a decline in their turnover as a result of the war. A third of the companies also expected having to reduce their personnel.

As a result of the disruptions discussed above and the instability caused by the war, many investors are adding an increased country risk to the profile of Finland and other European countries, such as Germany, that are dependent on Russian energy imports. This, together with the ceased trade with Russia and decreased interest in China, means that European companies are looking elsewhere for growth and there is one place that stands out from the others.

What can the United States offer?

Under these circumstances, many companies in Finland and elsewhere in Europe have turned their eyes on the U.S. markets. The appeal of the U.S. market reaches out to all elements of business from sourcing, manufacturing, sales and employees to financing. An example is Finnair that is opening its fourth route to the United Stated. In addition to organic growth, many companies have indicated that their near-term focus to be on M&A activities in the U.S. market.

As the world’s single largest economy, the United States accounts for approximately 20% of global output and for a third of global stock market capitalization. For many, the prospect of a large homogenous market and stable society are the key drivers for entry into the United States.

In addition, there are various other reasons for increasing interest in the United States:

  • Large unified market. The United States is prominent in virtually every sector of the global market, attracting high amounts of foreign direct investments and accounting for large part of global trade. In addition, the U.S. market operates under a single language, currency and set of laws and regulations which is attractive for businesses seeking growth. At the same time, it is also a powerful home market with internal demand without major dependencies on other markets.
  • Strong GDP growth and stable geopolitical position. Between 2012 and 2020, the United States experienced an annual growth rate of 1.72% with 2020 being the only year when the GDP declined. According to Nordea’s forecast, Finland’s GDP is likely to reduce by 1% with the new forecast being 2.5%, depending on the duration of the war. In comparison Finch has only cut its U.S. forecast by 0.2 percentage points.Economic growth will be moderate this year because of Covid-19, inflation and the war. However, the immediate effects are greater in Europe because of closeness to the conflict. The United States is a major global player with stable socioeconomic status and good geopolitical position. Therefore, it is better positioned to weather the geopolitical crisis as well as less likely to slip into a recession as a result of their fiscal policies, even in the face of inflation.
  • Secure supply chains. The impact of the war on the supply chains has been less prominent in the United States than in many other countries. U.S. supply chain disruptions, especially in shipping and production, have mainly been caused by labor shortages. This means that as employment situation is improving as COVID-19 slowly retreats and shipping and production issues are resolved in the United States.We are increasingly seeing Finnish companies raising funds to shift their manufacturing operations into the United States, enabling them to access the U.S. markets with domestically manufactured products. Having manufacturing operation close to the end market brings added resilience and flexibility into operations.
  • Importance of the United States as a trading partner. The United States is Finland’s most important trading partner after Sweden. Finland’s exports to the United States increased by 12.5% in 2021, a double-digit growth for the third year running, with services driving the growth. Since 2013 service exports have more than tripled (now accounting for 20% of Finland’s total exports of services) with ICT services being in the lead followed by fees for the use of intellectual property. The United States also accounts for 9% of Finland’s total goods exports with the top five goods exported being chemical manufactures, machinery manufactures, paper products, computers and electronic products, and transportation equipment.
  • Increasing cooperation between Finland and the United States. Finland has strengthened its relationship with the United States by entering into an agreement to acquire 64 F-35A fighter jets valued at EUR 8.4 billion from a US contractor for the Finnish defense industry. The agreement concerns the Finnish branch of the industry in the manufacturing and assembly processes and is estimated to create 4,500 person-years of work directly and 1,500 indirectly, according to the Finnish Defence Forces. This deal also lays the foundation for future cooperation between the two countries.
  • Opportunities for Finnish companies. The complementary strengths of the two countries and diversity of the U.S. market means that there are many opportunities for growth, innovation, and positive impact for Finnish companies regardless of industry. Amcham Finland has observed that Finnish ingenuity is well received by the U.S. market and presently there are many opportunities because of eCommerce growth and onshoring of manufacturing and industrial processes. Especially green energy and renewable materials are in high demand particularly in California and Texas. Other opportunities include game and digital development in addition to traditional manufacturing, logistics and processing. One such opportunity for sustainable businesses is President Biden’s Build Back Better Act which, if enacted into law, would allocate $1,750 billion to social security, education and green transition projects over the next ten years.
  • Strong market. The United States and Europe account for roughly 50% of total global consumption versus the 15% of China and India combined. The outlook for consumer spending in the United States is at its strongest in years as a result of full employment, rising wages, and rising home and stock values. The impact of inflation in the United States is expected to be offset by a rise in pent-up spending. Based on Trading Economics figures for March 2022, Finland was at -10.5 points in consumer confidence whereas the United States was at 59.4 points.
  • Stock market. The United States represents more than 60% of the MSCI All Country World Index, which covers approximately 85% of the world’s stock markets, while the corresponding figure for Europe is approximately 13%. The U.S. stock market is in a dominant position as a result of consumer-driven economic growth and the success of big tech companies. While the war has created setbacks for both the U.S. and the European stocks, the U.S. stock markets, which also benefit from a heavy presence of energy stocks (which have performed well with high prices for oil and gas), have seen a quicker turnaround than the European ones.
  • M&A activity. The United States accounted for more than half of the M&A deal value worldwide in 2021 (USD 2 trillion). Certain leading investment banks expect elevated M&A activity to continue in 2022.
  • Energy-independence. The United States imports only 5% of its energy and has the capacity to triple its oil drilling operations. Finland imports two thirds of its energy with Russia accounting for 60% of the Finnish energy consumption. As the United States is less dependent on Russian energy, the impact of sanctions will be smaller than in Europe.
  • Supportive regulatory and business environment. The U.S. business culture encourages free enterprise and competition, which is backed by the regulatory environment. In addition, sophisticated accounting, auditing, and reporting standards, respect for intellectual property rights, and strong institutions contribute to stable and supportive business environment.
  • Access to technology and workforce. The United States has a young, growing population with an advantageous population pyramid structure compared to many European countries. In addition, it has an educated, experienced and flexible workforce in addition to excellent access to modern technology.
  • Remote capabilities. Remote working and technology enabling online meetings are making investing in the United States easier than before the pandemic.
  • Easy market entry through greenfield or brownfield. Finnish companies can enter the U.S. market by either establishing a business in the United States or seeking growth in the United States through an acquisition. In a greenfield strategy, a company establishes a subsidiary in the United States, hires the local employees and builds up its own facilities, customer relationships and supply chain from the ground whereas in a brownfield strategy, a company simply acquires an existing US company with facilities, employees, suppliers and customers. While both options are viable, the greenfield strategy is often viewed as more burdensome and riskier than the brownfield strategy.

If the United States is your future market, we’re on the ground to support your entry or expansion

Borenius has extensive experience and a strong track record in assisting Finnish companies from startups to large publicly listed companies with entry and expansion in the United States. During the 10 years that we have been present in New York, we have also built a strong network of U.S. law firms and other experts across the country.

We are committed to facilitating your company’s expansion into the United States and will be with you from the moment the idea is born. We can:

  • assist your business in entering the U.S. markets, including the legal steps for setting up your business in the United States and provide useful insight gained in this respect throughout the years.
  • assist your business with corporate M&A, investments, finance, corporate & commercial and securities law matters through our Finnish and U.S. qualified team and through our extensive network of leading U.S. co-counsels to ensure that we meet all your business needs.
  • act as an external U.S. general counsel for your business and provide legal guidance in relation to outsourcing the U.S. legal needs of your business while maintaining the decision-making in Finland.
  • in the role of general counsel, assist your business in the U.S. with an array of legal matters, such as sales and licensing agreements, NDAs, board matters, annual filings, joint development and cooperation agreements, and smaller M&A.
  • provide preliminary assistance in dispute and employment matters.

[1] The Member States of the EU that have adopted the euro as their currency.

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Additional information

Juha Koponen


Helsinki, London, New York

Aksu Tuominen


Helsinki, London