Undertaking direct investments in Italy or abroad is an important decision, one that can be both profitable and gratifying. In order to make the best of it, however, it’s essential to know about the subject, especially as far as foreign direct investments are concerned, as they can still be a new sort of territory.

According to the International Monetary Fund and OECD (Organization for Economic Co-operation and Development), a direct investment is defined as foreign direct investment (FDI) when it’s meant to establish a continuous interest in the selected foreign Country and the foreign investor owns at least 10% of the ordinary stocks.

There are two kinds of foreign direct investments that you might decide to undertake. You can either install a branch of your business in the foreign country of your selection such option is called greenfield if you pick an area that has never been used before, and brownfield if your selected area needs to be subjected to reconversion or you can go for a M&A (Merge & Acquisition) kind of foreign direct investment, which means you will be taking over an existing firm in the foreign country you have selected for your investment.

To install a branch of your own means the capital stock of that foreign country will increase almost automatically, while such a result in case of a M&A foreign direct investment depends on the strategy you will be wanting to take as investor. Although the profit for the foreign country is not as immediate with this option, M&A is still the preferred form for foreign direct investments.

Finally, foreign direct investments can be either active (investments go from one’s domestic economy towards a foreign economy) or passive (the opposite).

Foreign direct investments are a particularly important step nowadays, as globalization and internationalization are becoming more and more essential in our modern reality.