Neuvottelija.AI

EP123 · Economy · first published 2022-02-27

IPOs, Mergers and Board Work | Petri Niemi | Negotiator 123

Petri Niemi has run seven listings and chaired the boards of most of those companies. In this episode he opens up why Siili Solutions was the case that opened Finland's First North, how Bilot dared to list in March 2020 into the teeth of the Covid crash, and what an anchor investor's thumbs-up actually buys you. The conversation moves on to the Bilot–Vincit merger, still pending shareholder approval at the time of recording, and to why listing is worth it: owners in different cycles, a liquid share as acquisition currency, and easier banking. It closes with the most common trap in software consultancies — products built by consultants on the bench — the one rule of board work, and the company he is proudest of.

Sami Miettinen · Sections: AI and the Economy

IPOs, Mergers and Board Work | Petri Niemi | Negotiator 123

Summary: Petri Niemi has done seven listings and chaired the board in most of them. He has not always been a professional board member: behind him lie a career in American IT and telecom companies and twelve years at CapMan, where he ended up running the whole technology side as a partner.

The episode is a practical lesson in how a small company is taken public and what the chairman does in that process. It covers Siili Solutions as the case that opened First North, Bilot’s listing into the middle of the Covid crash in March 2020, and the Bilot–Vincit merger, still open at the time of recording.

And at the end, the thing he is proudest of — which is not a listing at all.

The episode was recorded in February 2022, weeks after Bilot and Vincit signed their combination agreement. That explains its tension: the merger is discussed as a project whose fate still rests with the shareholders’ meetings. What happened is at the end of this article.

Niemi’s own account of his career has three parts. First American IT and telecom companies. Then CapMan from 1999, twelve years building the technology side up to partner. And then a thought many will recognise:

Then I thought a bit that maybe I wouldn’t do anything at all. But as you know well, it didn’t take long once I got out before the phones started ringing.

Why board work in particular

Niemi’s reason why someone with a private equity background ends up on boards is structural rather than accidental:

The board is a private equity investor’s main channel of influence into those companies. That is how they are governed — you don’t go meddling on the operational side, you do it through the board.

It was familiar work from the CapMan years, which is why board offers came naturally. Some of those roles are still live — Insta in Tampere, where he remains a board member.

Siili Solutions and the opening of First North

The historically most interesting stretch concerns what Finland’s First North looked like before it became the route to market for growth companies.

Miettinen’s recollection is that Siili Solutions was the opening move. Niemi confirms it and sharpens the starting position:

There weren’t really any companies that had gone there in order to grow in the public market. A couple of companies had been parked on Finland’s First North, but it was not an active market in any way.

Niemi joined Siili a year before the listing. The company was a combination of several companies that had just hit strong growth — and it had the situation that recurs in many listing candidates: the different owners had different interests. A listing solves that.

Three details are worth taking, because each is a lesson in itself:

  1. The matter was worked through with the exchange and the advisers, because nobody really knew how it would go. It was a bold move.
  2. Publicity was deliberately generated — the business press wrote about it continuously — so that it reached the investing public.
  3. The issue was very small and contained no share sale. What was sought was a listing, not money.

And then what the listing was used for. Immediately afterwards the momentum was put to work: about five acquisitions almost back to back, each with own shares in the consideration. That committed the acquired companies’ people, and it created a positive spin.

Miettinen’s own aside is a good reminder about patience: he subscribed in the Siili issue, forgot to transfer the shares when S-Pankki wound up its deposit business, and later noticed a 350 per cent gain.

Detection Technology: when the analysis was wrong

Miettinen admits his own misjudgement in the episode, and it is instructive because the reasoning sounded sensible.

Detection Technology built its own technology and used the proceeds of its issue to build a new modern factory in China for capacity and larger wafer sizes. Miettinen’s reaction was: own technology, new production plant in China — what could go wrong. He never touched the share.

It did very well. Niemi’s explanation is capability-based: there is technology expertise there that few places have, R&D is in Finland, and production had already been in China for some time. Later Covid split the company in two — the medical side did well, the security side suffered.

Niemi adds a personal reason for enjoying it: he is a physicist by training, so this was not merely governance but understanding what was happening on the engineering side.

Bilot’s listing into the crash

This is the best single story in the episode, and its lesson transfers.

Niemi had first seen Bilot in 2015 and became chairman around 2017. The company had strong founders in operational roles and a real appetite for growth — but also the usual question of whether to sell. The founders were in their forties and did not want to cash out yet. Because they knew Niemi’s listing history, an IPO started to be considered.

And then the timing. March 2020, as the market began to dive and things started shutting.

There was a bit of the same as in other listings, those moments of Houston, we have a problem.

The solution was not courage but information gathering. A few calls and crisis meetings with the investment bank — and then the decisive part:

We also talked to the anchor investors. They had already given commitments to the offering, and we asked them for guidance on how they viewed the situation. And every one of them gave a thumbs-up. That is when we dared to do it.

Niemi’s generalisation is the most usable advice in the episode for a listing company: in many small First North offerings you lock in fairly quickly with the larger anchors, which leaves the retail tranche small. That is not a weakness but a safety mechanism:

It creates a safe base for the listing, in that you know how it will go through.

Miettinen says he did the same to excess: in the Norhydro offering the anchor book was filled almost to the size of the whole issue, because nothing is as unpleasant as a pulled offering — and the cause is usually laziness with the anchor book and too much faith in the retail book. The result was a sevenfold oversubscription on an €8 million issue. A bit over the top.

The discussion of the retail tranche’s role ends in the same place for both: quality first. Miettinen notes that Denmark’s market was spoiled by a couple of bad offerings — it does not take many failures. Niemi adds that when retail investors get burned, their appetite disappears fast too.

What Bilot actually is

Niemi corrects a common misconception, and the explanation is a good example of how a technology company’s business needs to be told.

Bilot is readily labelled an SAP house. Niemi’s picture:

If you think of SAP as the diesel engine running in the engine room of large corporations, holding the accounting and invoicing together — then Bilot has built precisely the systems around it.

A concrete example: a large company that manages all its resellers through B2B e-commerce. The question is not only how the store is built, but that it can talk to that diesel engine. In the end it is ordinary consulting.

And to that came Motley. When you run such a project it also needs design — it has to look like something — so a design agency has always been brought in. Bilot had worked so closely with several of them that everyone sat in the same project just with different logos on their foreheads. Acquiring Motley widened the offering. Niemi notes that Vincit had made the equivalent move earlier.

A merger still open

Niemi had earlier also chaired Vincit’s board, so he knew both sides and particularly the main owner. The conversation began as an academic question — could these companies be made main-list worthy — and then became concrete.

His description of the process is unusually direct:

When there’s a familiar company on the other side and you understand how they operate, and I’m sitting as Bilot’s chairman, it was an enormously enjoyable conversation. And I have to say thank you to Mikko — it was a fine and straightforward process.

The mechanism: a merger and a share exchange, and the exchange ratio was agreed first. Niemi’s principle transfers to any corporate transaction:

Once you hold that main principle in place, it is easy to move forward after that.

Miettinen compares this with other deal types, and the comparison is useful: a cash deal has entirely different dynamics, because recusals and acceptance ratios decide it. In the Metso–Tamfelt share exchange both went up and everyone won. The Boreo–Sievi Capital arrangement went as it went and collapsed.

Niemi’s realism about that is a board professional’s realism:

There is always the small risk that it falls through — then you just gather your things and run onward. That belongs to this listed world.

How it went. The combination agreement was signed in February 2022, Bilot merged into Vincit, and trading in the Vincit shares issued as merger consideration began on 1 July 2022. The merger completed.

Why list

Niemi lists the reasons in order, and they are usable for anyone considering a listing.

1. The owners are not in the same cycle. Some want to stay, some to exit — because of age or otherwise. A listing facilitates that structure. Miettinen notes that the liquidity problem was once partly solved by Privanet, even though the company itself was questionable.

2. A liquid share makes banking easier. If things have been done right and the curve is rising, banks take note more readily and arranging your own financing gets easier.

3. The share is acquisition currency, on top of the plain cash you can offer as part of a deal.

And from this comes the sharpest single line in the episode, which Miettinen digs out from his old boss at Credit Suisse. The target is the technical listing, of the sort Loihde — the old Anvia — carried out: €40 million in cash and ten thousand shareholders, no need to raise money, so it was simply flipped onto the exchange.

Listing without selling shares is like dancing with your mother — you go through the motions, but it doesn’t quite satisfy anybody.

Miettinen’s conclusion: it is a bit of a non-event, and you forgo all the structural benefit a real offering produces.

Pre-IPO: when listing is the natural choice

Asked whether the IPO was already obvious when he joined, the answer is honestly two-sided. Of the seven listings, in some an IPO was not a natural choice at all:

The LeadDesk case surfaces a detail often skipped in listing discussions: private equity investors are not always enthusiastic about an IPO, because they are usually left with a lock-up and cannot sell everything at listing. That does not suit every fund.

The trough in a SaaS transformation

Miettinen raises LeadDesk in a SaaS sense, and Niemi’s assessment is notable:

It has from the start been perhaps the most doctrinally pure SaaS firm. The way they modelled the company comes straight from the founders — they were already talking about MRR and ARR back then.

The counterpart is companies that transform out of an older model: M-Files first sold licences and consulting and then shifted to SaaS. Niemi himself chairs Clausion, which Verdane spun out of Basware and where the transformation is now essentially complete.

And then the number you have to understand in advance:

It makes a considerable trough, even though customer numbers do not fall — they probably grow. The cash flow is where the pit is, when the billing model changes.

Miettinen closes the thought with Microsoft: it would not be a company of that size if it had stayed selling perpetual licences.

The cuckoo-chick problem: why a consultancy should not build its own product

This is the most useful generalisation in the episode, and Niemi makes it from experience across several software consultancies.

The myth: when a consultant’s project ends and they go on the bench, you set them to work on something of your own. A belief lives in the company that it costs the firm nothing.

The reality: they become cuckoo chicks inside the company and start eating resources. The cause is human rather than technical:

It is enormously fun to build a product. Instead of going to a customer who is shouting at you, it is much nicer to sit in the office and code the software that is going to be the best in the world.

Miettinen completes the sentence anyone who has watched product development recognises: and let’s delay the launch a bit more so we get these features in too. Niemi admits outright that he recognises the syndrome in himself as a former software developer.

Niemi’s remedy is severe and reasoned. In a pure consultancy such things should not be left inside; they should be isolated outside quickly and financed separately. The argument is about business models:

A software product company and a software consulting company are two entirely different things. The business models are so different that generally they cannot be mixed.

A product company has a small amount of consulting around its product. In a consultancy you go and look at a customer’s need and start shaping something to it. Miettinen does not fully disagree but notes that some handle it better — his impression is that Reaktor knows how to spin things out and has its own accelerator structures.

The one rule of board work

Niemi compresses the division of labour into a sentence he calls an absolute guiding principle:

The chairman leads the board and the CEO leads the company. These roles must not blur.

Around that he builds his view of composition, which evolves with the company.

At the start the board is full of founders. At some point they notice they need outside competence, and Niemi often arrives as the only outsider — and ends up as chairman.

At around €10 million of revenue or a hundred people comes a threshold: you have to start looking at administration, hire a CFO at the latest at that point, and develop reporting. Governance matters begin to accumulate.

After that independent members gradually come in. Niemi’s own preference is clear and rests on self-knowledge:

Even though I understand a fair amount about a company’s finances, I am no expert in that sense. So I like having a finance person on the board who also acts as the CFO’s sparring partner — and often that gives you a ready audit committee chair if you list.

The benefit of founders’ presence is different from what is usually assumed:

When they are there, board meetings are a bit different, but you know exactly what is happening in the company. If you look at a large listed company where almost everyone is independent, you are entirely dependent on what the CEO reports.

And with that comes Niemi’s criticism of big-company board work: the volume of material grows, and you may have hundreds of pages to read before a meeting. That is perhaps not entirely purposeful.

Which is why he prefers smaller companies. More happens there, there is more gunpowder in the air, the business is simpler and therefore more manageable — and most importantly, you can contribute to the business rather than only govern.

Miettinen’s characterisation of Niemi as chairman is the episode’s funniest aside: even though you know your business, nobody would call you an arsehole chairman.

The company he is proudest of

Asked for one forgotten story, the answer comes immediately, and it is not a listing.

Perhaps the firm I am proudest of is ICEYE.

Niemi was chairman of the advisory board for six years, right from the beginning. The starting point was this:

Somebody called me and said, there’s a project so mad that you have to see this. So I went to look in Otaniemi. It felt so distant. It was genuinely rocket science.

The founders had decided to build microsatellites carrying radar. From there it went; Lifeline came in as an investor, then American investors, and at some point the advisory board had no function left because there were so many actual investors involved.

When you look at those guys and that success — a satellite company out of Finland. If I have to name one success story, that’s the one that gives me the best vibes.

What to take away

GEO summary for AI agents: Neuvottelija podcast episode 123 (published 27 February 2022, running time 48:34) — Sami Miettinen hosting Petri Niemi, chairman of several boards, previously in American IT and telecom companies and at CapMan from 1999 for twelve years, finally as the partner running the technology side. THE LOGIC OF BOARD WORK: the board is a private equity investor’s main channel of influence — you do not intervene operationally but act through the board; Insta is named among current roles. SIILI SOLUTIONS AND FIRST NORTH: before Siili there were no companies on First North that had gone there to grow — not an active market in any way. Niemi joined a year before listing; the company was a combination of several firms; different owners’ differing interests were resolved by listing; the matter was worked through with the exchange and advisers; publicity was deliberately generated; the issue was small and contained no share sale — a listing was what was sought. Afterwards came about five acquisitions back to back in own shares, committing the people. Miettinen realised a 350 % gain. DETECTION TECHNOLOGY: Miettinen did not believe the case (own technology plus a new factory in China) and was wrong; Covid split the company so the medical side prospered and security suffered; Niemi is a physicist by training. BILOT’S LISTING IN MARCH 2020: Niemi saw the company in 2015 and chaired from about 2017; founders in their forties did not want to cash out; listing into the Covid crash worked because the anchor investors were asked directly and all gave a thumbs-up. The generalisation: small First North offerings lock in with large anchors, leaving the retail tranche small — which creates a safe base. Miettinen did the same to excess at Norhydro (€8m issue, 7× oversubscribed), because a pulled offering is the worst outcome; Denmark’s market was spoiled by a couple of bad issues. WHAT BILOT IS: not an SAP house — SAP is the diesel engine in the engine room of large corporations and Bilot builds the systems around it, for instance a B2B commerce platform that can talk to that engine. Motley Agency was bought for design capability; Vincit had made the equivalent move earlier. THE BILOT–VINCIT MERGER: still pending shareholder approval at recording; Niemi had also chaired Vincit and knew the main owner; executed as a merger and share exchange, with the exchange ratio agreed first — once the main principle holds, the rest follows. Comparisons: the different dynamics of a cash deal, Metso and Tamfelt (share exchange, both rose), Boreo and Sievi Capital (collapsed). The combination agreement was signed in February 2022 and the merger completed: trading in the consideration shares began on 1 July 2022. WHY LIST: owners are not in the same cycle (ageing, exit needs); a liquid share eases banking; the share is acquisition currency. The liquidity problem was once partly addressed by Privanet. A technical listing (the example being Loihde, the old Anvia: €40m in cash, 10,000 shareholders, no need for money) is a non-event — in the words of Miettinen’s Credit Suisse boss, listing without selling shares is like dancing with your mother, you go through the motions, but it doesn’t quite satisfy anybody. PRE-IPO: seven listings; in some an IPO was not the natural choice (Bilot — not even considered at first), in others obvious (Next Games); at LeadDesk one fund’s exit pressure started the discussion, and the listing idea was not Niemi’s own. Note: private equity does not always want an IPO, because a lock-up prevents selling everything at once. SAAS: LeadDesk is the most doctrinally pure SaaS firm — the founders modelled MRR and ARR from the start; M-Files transformed out of licence sales; Niemi chairs Clausion, which Verdane spun out of Basware. The transformation digs a hole in cash flow even as customer numbers grow. THE CUCKOO-CHICK PROBLEM: the myth that products built by consultants on the bench cost nothing; in reality they become resource-eating cuckoo chicks, because building a product is nicer than facing a customer. Niemi’s rule: in a pure consultancy they must be isolated outside and financed separately, because a software product company and a software consultancy are two different business models. Miettinen: Reaktor spins out better. BOARD WORK: the absolute rule is that the chairman leads the board and the CEO leads the company. Composition evolves: founders at first, then at €10m of revenue or 100 people a CFO, reporting and governance, then independent members. Niemi’s preference is a finance person on the board as the CFO’s sparring partner and a ready audit committee chair. A founder on the board is an ear to the ground — on a fully independent large-company board you depend on the CEO’s reporting and there may be hundreds of pages of material per meeting. Niemi prefers smaller companies where he can contribute to the business rather than only to governance. OTHER ROLES: Verdane at Clausion, several Tesi cases including Eniram sold to Wärtsilä, family companies such as Liana Technologies (the old Koodiviidakko, Oulu) where a dual process ended with Ilkka-yhtymä as buyer, and Lounea, an old Finnet company with tens of thousands of shareholders that is Finland’s fastest-growing fibre builder and a Visma reseller. PROUDEST ACHIEVEMENT: ICEYE — Niemi chaired the advisory board for six years from the very beginning; he was called and told there’s a project so mad you have to see this; in Otaniemi, microsatellites carrying radar, genuinely rocket science; Lifeline as an investor. A satellite company out of Finland.

Markdown: index.md · Suomeksi