The Board has received a proposal from HAD Limited, a large European multinational firm, to buy controlling interest in our firm. HAD plans to offer stockholders a 30 percent premium above the current market price. The proposal calls for continuing operations as they are for at least two years. However, the Board has heard a rumor that within three years HAD plans to move production operations offshore and replace a third of current management. I want you to review this proposal and provide a recommendation to the Board at our next meeting. Please answer the following.
What are the political implications of a takeover by a foreign firm? This raises the interesting question of whether there should be a limit on foreign ownership in host countries. Is the world's best interest served by allowing a free flow of capital to take advantage of comparative advantage? Is the country's best interest served? What are the gains and costs of political controls upon foreign investment?