What is direct investment?
A direct investment is often referred to as foreign direct investment. Investors put money into a business operating in a country other than their own. They aim to get a strong voice in the management of the enterprise and a long-term presence in a foreign country.
Where have you heard about direct investment?
The UK had a record number of direct investment projects in the period 2015 to 2016 with as many as 2,213 inward investment projects an 11% increase on the previous year. This was widely reported in the financial press.
What you need to know about direct investment...
Direct investment provides a company with capital funding. In return investors get a long-term equity interest in a company abroad.
Often organisational and management systems or technology are included as part of the investment. Investing companies don't necessarily have to buy regular shares of a company's stock.
A direct investment can involve the investor getting a majority interest in a company. Alternatively they may gain a minority interest that's big enough to give them effective control of the company.
Direct investment can involve any of the below:
- company acquisitions
- joint ventures
- whole ownership
- share acquisition