EP200 · Economy · first published 2023-07-03

Closing an acquisition: the share deal and business transfer differences that can decide millions | Negotiator 200

This is a summary on Neuvottelija — Articles. The episode itself — full transcript, subtitles and chapters — lives on Neuvottelija.com, which is its canonical home.

In the channel's two hundredth episode Tero Nummenpää, chair of Translink Corporate Finance, and Ilkka Liljeroos, managing partner at DLA Piper, work through the mechanics of the last day of an acquisition. A share deal transfers the whole company with its debts and liabilities; a business transfer picks items out with tweezers — but two things it cannot leave behind: employment liabilities and competition law liability. Signing is not closing, and the episode reveals three separate clocks: signing, the locked box date and closing. The headline price is not the money the seller receives: net debt comes off enterprise value, covering interest-bearing debt, shareholder loans and tax liabilities but not trade payables, and on top of that sits the working capital adjustment, which prevents gaming and evens out seasonality by comparing closing against a twelve-month average. The open question is whether SaaS prepayments are working capital or net debt. Then closing accounts versus locked box, the rise in earn outs in DLA Piper's report, the multiple effect of an accounting error — a hundred thousand on the balance sheet is a million at ten times — and why the seller's leverage sits in the letter of intent and nowhere after it. It ends with a ten-question checklist for owner-entrepreneurs. Published 3 July 2023.

Sami Miettinen · Sections: AI and the Economy

Closing an acquisition: the share deal and business transfer differences that can decide millions

Summary: In the channel’s two hundredth episode Sami Miettinen works through the mechanics of the last day of an acquisition with Tero Nummenpää (chair of the board of Translink Corporate Finance) and Ilkka Liljeroos (managing partner at DLA Piper). The episode is unusually concrete: it treats an acquisition not as a strategy but as an arithmetic problem. What price is actually being discussed, what really transfers in a share deal and in a business transfer, how net debt and the working capital adjustment carry you from enterprise value to the bank account, when to choose closing accounts over a locked box — and at which point in the process the seller still has leverage. Published 3 July 2023.

A note on reading this. This article is curated from the episode’s transcript rather than summarised from its running order. Views are attributed by speaker: Nummenpää speaks as an investment banker and, in practice, always as the seller’s adviser; Liljeroos as a lawyer. The structure is thematic, so one section may draw on passages from several points in the episode. Timestamps refer to the curated Finnish transcript. Nothing has been put into the speakers’ mouths: where the episode does not cover a topic in the outline this article follows, that is stated rather than filled in.

Scale. Miettinen says Translink does as many as ten transactions a year (00:17), and Liljeroos says DLA Piper closed 36 M&A transactions in Finland the previous year — he does not do all of them himself, but does many (00:27–00:30). The observations in the episode therefore rest on two sizeable deal flows rather than on individual cases.

1. Share deal or business transfer

What is being bought

Liljeroos’s distinction is brief and worth reading twice, because almost everything else follows from it: in a share deal the shares are bought from the shareholders; in a business transfer the business is bought from the company itself (03:34). The seller is a different party, the object is a different thing, and liabilities travel in a different direction.

Miettinen’s description of the same point is the one that sticks:

In a share deal you are buying a security — the whole package, with its debts, liabilities, receivables and employees. A business transfer is more like surgery: you pick things out. (04:46)

A business transfer therefore works on a tweezers principle. In Liljeroos’s formulation, what transfers is, as a starting point, what is agreed to transfer (05:08). That is attractive to a buyer, because unknown liabilities stay with the selling company.

Two things the tweezers cannot leave behind

There are two exceptions to that starting point, and Liljeroos raises both.

1. Employment liabilities. Holiday pay accruals and other employment liabilities relating to transferring employees follow the employee in a business transfer by operation of law, whether anyone wants them to or not (05:21). The deal terms do not decide whether they come along; they can only allocate who ultimately pays. In Finland it is customary for the holiday pay liability to be calculated in advance and taken into account in the price already at closing (18:45).

2. Competition law liability. Liljeroos describes this as rarer but large in risk. If there has been a cartel or something similar, the liability follows, as a starting point, the business to which it belongs. The conclusion is worth reading at the table where structures are being designed:

You cannot structure the deal as a business transfer so that the liability stays behind. (06:09)

Miettinen asks the follow-up any adviser would ask: could it not have been shifted with a very long specific indemnity? Liljeroos is sceptical. You can agree something — but does the agreement have any backing when the sums are large, and what does it do to the business itself, is it on a sustainable footing afterwards (06:29). An allocation clause is not the removal of a liability if the counterparty’s ability to pay does not carry it.

Carve-out and pro forma

In large groups the business being sold may be spread across several companies. It then has to be carved out, either into a new company or directly into the buyer’s company, so that the buyer acquires different businesses from different entities (03:59–04:25). Nummenpää’s addition says what that means on an investment banker’s desk: a pro forma calculation of the transferring items has to be built (04:26). A carve-out is not only a legal operation — it is also the moment when accounts have to be constructed for a business that has never had accounts of its own.

Working capital behaves differently

The structural choice also changes the character of the working capital discussion. Nummenpää: in a business transfer the trade receivables have already been invoiced out of the selling company and are generally not transferred anywhere — they come in to the seller over time. The buyer starts invoicing from a given date, and the working capital calculation effectively starts from zero (17:51–18:23). Inventory, on the other hand, often moves physically, along with the employees and the systems (18:36).

From this follows a trap Nummenpää states outright, and it applies to joint ventures and newcos as well: it is naive to assume the new company runs itself. Working capital can eat cash for the first six months, and salaries have to be paid from the first month of operations, before any money has come in (19:01–19:23). Somebody has to fund the working capital of a new company too.

2. Signing is not closing

The episode opens with Miettinen proposing that they start at the end, and Nummenpää’s answer is the episode’s thesis:

That is what matters: nothing happens unless the deal closes. (00:51)

The wording matters. Signature is not the moment money moves or ownership transfers. The episode in fact distinguishes three separate clocks, and confusing them is one of the more expensive misunderstandings available.

Clock 1: signing. The sale and purchase agreement is signed. In Nummenpää’s example that happens a week before the turn of the year (20:12). At this point, under closing accounts, the parties do not yet know the final price: whether it is 20.1 million or 19.8 million emerges only once the balance sheet is drawn up (21:44–21:58).

Clock 2: the locked box date. Under a locked box the price is calculated on an earlier balance sheet — end of October or end of November in Nummenpää’s example. Liljeroos’s observation is the one to absorb:

If the deal is done as a locked box, the business is run at the buyer’s risk from signing onwards — in fact from the locked box date to closing. (25:47)

So economic risk can pass before ownership passes, and before the agreement has even been signed. The buyer takes the upside and the buyer takes the downside (26:00).

Clock 3: closing. Ownership transfers and the money is paid. Nummenpää mentions that Translink often handles the payment through its client funds account: the sums arrive there and are netted onwards (03:12).

What stretches the gap

Liljeroos names a concrete reason why the gap between signing and closing can stretch, and does not soften it:

Especially in Finland, now that the merger notification thresholds have come down — ten million — there are more notifications. I am not criticising, but in my own experience the competition authority is relatively slow. (23:35)

He goes on to say that even fairly simple matters can take a long time, and that in his recent cases the review has taken an extremely long time and gone to a second phase (23:53). That is not a technicality: in a locked box structure every day of delay is a day of business risk the buyer carries without ownership, and the seller carries without money.

And a fourth clock: after closing

Under closing accounts the process does not end at closing. In Nummenpää’s example the buyer pays 19 million at closing against an assumption of 20, and if the correct figure turns out to be 20.1 million, the buyer pays the 1.1 million difference a month later, once the numbers have been calculated and the auditor has looked at them (20:31–21:08). Underpaying is deliberate: nobody wants to be refunding money (21:08).

3. The price is not the money the seller receives

The first misunderstanding happens before anything is written down

Nummenpää describes a situation he has run into many times:

A potential buyer has said to the seller: hey, I’ll pay twenty million for your company. Hands are more or less shaken, and later it turns out nobody actually knows what was agreed — was it the equity value or the enterprise value. (01:12–01:26)

The difference can be large. Nummenpää’s own practice is unambiguous: when he talks about the value of a company, he always means enterprise value (EV) (02:05).

The building blocks, and which of them has leverage

The bridge from debt-free enterprise value to equity value is built from a handful of items, and the episode makes an observation about them that is a negotiating instruction in itself.

Enterprise value (EV) moves a great deal, because it is usually derived from a multiple: current profitability is multiplied, or future cash flows are discounted to the present (01:44). Nummenpää talks about EBITDA multiples and gives seven as an example (29:55).

Net debt. In practice cash is added and interest-bearing debt subtracted (02:23). It covers:

• interest-bearing bank loans — the clear case;
• shareholder loans — both treat these as debt (08:13), though Miettinen notes that in murkier cases the classification gets slippery (06:46);
• tax liabilities — Nummenpää’s example: if the company has made three million in profit in the early part of the year and no advance tax has been paid, some twenty per cent of that belongs to the tax authority. It is not interest-bearing at the point where no tax assessment has arrived, but it still counts as debt (08:22).

It does not cover trade payables, because they are not interest-bearing (08:04) — those belong to working capital.

Net debt can also be positive: if there is 10 million in cash and 5 million of debt, 5 million is added to enterprise value (02:45).

The working capital adjustment. Its own chapter, below.

Miettinen’s observation about proportions is what determines where to push in a negotiation:

Debt-free enterprise value is where the leverage is. These other elements are more static, because they are balance sheet items. That asymmetry matters enormously in a negotiation: they are not of equal weight. (29:52–30:11)

A multiple and a balance sheet item are not the same thing. A hundred thousand moved on a working capital line is a hundred thousand; a hundred thousand moved in EBITDA is the multiple.

The working capital adjustment: why it exists

Nummenpää’s explanation starts from the question a seller asks almost every time: we’ve got two million in trade receivables here — surely we get those thrown in as well? (07:43)

No. The reasoning is good:

That is a factor of production in exactly the way the factory machines are, or the organisation: those receivables will still be turning over next year. (07:48)

The adjustment prevents two things, and Nummenpää labels them (a) and (b) himself (11:12).

(a) Gaming. Without the adjustment the seller would have an obvious incentive. Nummenpää walks the scenario through out loud: suppose we don’t pay the trade payables quite on time but keep the cash, build up an extra million — the creditors won’t send collection letters immediately — and at the same time accelerate sales invoicing, tell everyone to send their invoices two weeks early, and we get a couple of million more of purchase price (09:16–09:42).

(b) Seasonality. In most companies sales move up and down within the year, and receivables and payables move with them (09:58–10:10).

The mechanism. Working capital at closing is compared against, for example, the average of the preceding twelve months (10:25). Nummenpää’s example: if the average has been 500 thousand but at closing there is a million in receivables, it is fair for the seller to be credited the 500 thousand difference — the money is arriving in a couple of weeks (10:31–10:50). For trade payables the same works in reverse (11:05).

And where the twelve-month average fails. Nummenpää returns to this at the end of the episode with an example worth remembering: in a growing e-commerce business the value of inventory can rise by a million euros a year. Is a twelve-month average still a sensible normal level of working capital if the business has doubled over the year? Perhaps not. Perhaps you have to give a little ground in the negotiation. (43:22–43:43)

The most honest moment in the episode

Liljeroos makes a confession worth quoting in full, because it is the best risk-management advice an M&A episode can offer:

The hardest thing for me personally in a sale and purchase agreement has always been writing the price mechanism, these adjustment clauses. And even now, having done these for quite a long time, I do model calculations for myself with really simple numbers and scribble pluses and minuses in the margin of the document or my notes. And I check that what I have written actually works. (16:02–16:30)

The reason is simple: it would be a pretty horrible mistake to write it the wrong way round (16:34). Miettinen admits the same from his own side — you have to check the sign yourself, several times (07:12) — and Nummenpää concedes that even inside Translink there are discussions about whether this one was a plus or a minus (17:16).

Both give the same concrete piece of practical advice: attach a model spreadsheet and two worked examples to the agreement (16:43, 16:57). Liljeroos’s justification:

Few people necessarily read the lawyer’s text. But in the end it is often precisely the lawyer’s text that gets read, if things go wrong. (16:47–16:56)

Nummenpää’s warning on the same point concerns deals done without advisers: if we are talking about laypeople agreeing a deal without advisers, I can assure you that something in it will probably go wrong (17:23).

SaaS prepayments: the episode’s open question

This is the episode’s most interesting unresolved point, and both say so outright: there are many opinions and no single right answer (14:18).

The setup: a customer has paid for a software licence twelve months in advance. Is the money the company’s money? Two ways to look at it (12:20):

Nummenpää’s position as the seller’s adviser: not net debt, at any rate. As net debt the prepayments would be deducted from cash one hundred per cent, which he does not consider fair (14:22). The reasoning: the money is in practice the company’s money once it has been paid, the contracts are usually such that it is not refunded, and in a growing company the item only grows (14:40–14:58).

Miettinen’s criterion is the common-sense one and the most useful thing in the section: does the answer turn on when the cost was incurred? (13:13) Nummenpää accepts the framing: in a SaaS model gross margin may be 89 per cent, but there is still cost, and if the deal lands mid-year, six months of cost remains — the servers keep running (13:21–13:27). But the opposite case is just as real: if the cost was front-loaded, say as installation, the service becomes steadily more profitable and a larger share arguably belongs to the seller (13:41–14:02).

Liljeroos’s addition puts the question where it belongs: this is where negotiation comes in (12:49).

And what decides whose reading wins is, in Nummenpää’s account, the quality of the work:

Translink generally builds a monthly-level spreadsheet with working capital, the cost level and invoicing all modelled carefully. And if you don’t do that work, as an adviser you are in real trouble: you don’t even understand the sign, let alone the monthly effect. (15:37–15:47)

Closing accounts or locked box

Closing accounts. EV is agreed in advance — in the letter of intent or at the latest in the agreement. An estimate is paid at closing, slightly on the low side, and the exact figure is calculated afterwards using the formula in the agreement, which takes net debt and the working capital adjustment into account, once the auditor has reviewed the numbers (19:50–21:08).

Locked box. The price is fixed in advance on a given balance sheet, whatever the balance sheet looks like at closing (22:12). It typically comes with:

• a leakage covenant — the owners have not moved money out of the company since the lock date (22:25, 22:33);
• a business as usual undertaking (22:37);
• locked box interest, compensating for the return over the interim (22:37, 23:05).

Which to choose? The episode gives no single answer but two criteria, and they pull in different directions.

Timescale favours closing accounts. Liljeroos: under a locked box the business risk has passed to the buyer from the lock date, so a long delay — and a competition review can produce one — is a risk for both. The seller feels badly treated if the business has run well and there is no return on the locked price; the buyer carries the risk if it has not run well (24:13–24:34).

Simplicity favours the locked box. Liljeroos says he likes it himself: no wrestling after the fact and not much disagreement (25:03).

Accuracy favours closing accounts. The same Liljeroos: closing accounts readily gives a somewhat more correct price, based on the state of the target at closing (25:29).

The argument about locked box interest. Miettinen recognises it from the zero-rate era: some took the word interest literally and concluded that when rates were negative, this should be negative too (24:36). His own diagnosis is precise: the risk-free rate is a powerful anchor even where it should not be — what is at stake is the risk-adjusted return of a business (24:48–24:59). Nummenpää’s position on the seller’s side is the same: the interest is the probable return over the interim after tax, not a two per cent rate on the purchase price (26:10).

Both report that disagreements about this are rare in Finland. Liljeroos’s explanation: Finland has good advisers as a starting point, matters are worked through carefully, and the parties understand the adjustment items in closing accounts (25:19).

Earn out

The trend is measured, not guessed. Liljeroos cites DLA Piper’s Global M&A Intelligence Report, produced annually across the firm: last year’s report covered 800 transactions, 200 of them in the Nordics, and compared the trends against 2,500 deals from earlier years. There were clearly more earn outs in 2021 than in 2020, and in 2022 there were 20 per cent more than in 2021 (27:32–28:21).

Why. Nummenpää’s explanation is uncertainty: the seller says it will double EBITDA, and the buyer does not swallow that whole — but the buyer is happy to pay a higher price if the doubling actually arrives (28:43–29:03). An earn out bridges the valuation gap that always exists:

The buyer wants to buy tin and the seller wants to sell gold. (29:16)

Liljeroos adds a second function: owner-entrepreneurs are wanted on board, with skin in the game for a while, so the integration can be carried out (29:31–29:44).

Nummenpää’s counterweight is clear, and it is the most valuable advice for a seller in this section: a good monthly-level forecasting model can act as a remover of the earn out (28:32). An earn out is not the only way to resolve information asymmetry — reporting quality is another.

Risks. A second-year earn out carries a lot of leverage (34:45). And if the buyer takes control, it could in principle have an incentive not to chase EBITDA, because then it does not have to pay (34:51–35:16). Mechanisms that allow the earn-out target to be achieved regardless are worth building in (34:56).

But both consider this rare in practice. Nummenpää: a listed buyer does not want to report a worse quarter merely to shrink an earn out, because additional EBITDA probably shows up in its own share price, and there is no point suppressing it (35:50–36:09). Liljeroos’s observation over the years is a good example of careful phrasing:

The ones that have genuinely been disputes have most often related to the earn out — but very rarely in proportion to how many deals have had an earn out in them. (36:22–36:42)

In other words: an earn out is the most common subject of disputes, but an earn out is not a common cause of dispute.

And the surprising example. The dispute does not always run in the direction you would expect. Nummenpää describes a case where the company had done its own calculation and claimed a five million earn out — and the buyer pointed out that they had themselves forgotten to adjust out a 50,000 euro cost allocated from the group (36:51–37:10). Nummenpää’s conclusion: this is an example of what happens without advisers — the calculation cannot be done properly (37:13).

The multiple effect: a hundred thousand on the balance sheet, a million in the price

This is the episode’s single most instructive example, and it is worth reading slowly.

Nummenpää’s scenario (31:15–32:20). Two years ago the bookkeeper made a mistake and recorded as a receivable something that was in fact a liability. A year later they notice their own error but do not dare say anything to management — and correct it in the wrong direction, doubling the mistake.

On the balance sheet it is a hundred thousand out. But because the error feeds through to earnings and the buyer is paying, say, ten times EBITDA, it is a million euros.

Nummenpää adds an important point about timing: if this is found in due diligence, so much the better — it would be considerably worse to notice it when the next set of accounts is prepared, after the deal (30:53–31:02).

And this is where Liljeroos’s part begins, which is the legally interesting one. It is no longer a loss to the company but a question of price: the seller gave a warranty about the accounts that was not accurate, and through that the buyer has probably ended up paying too much (33:21–33:45).

The difficulty is evidential, and Liljeroos breaks it into two questions:

1. Can the buyer show that the loss is calculated with the multiple? Is the amount a hundred thousand, or a hundred thousand times ten, i.e. a million? (33:45)
2. Was the price paid based on the year the error concerned — or on this year’s result, which the error no longer affects? If the latter, it was only a balance sheet error of a hundred thousand and not a million (34:11–34:19).

According to Liljeroos the Finnish market has developed here. Ten years ago people always fought over whether a loss was direct or indirect; now the field understands that the question is what is reasonably foreseeable (32:48–33:12).

4. What happens to contracts — and what does not transfer by itself

The consequence of the structural choice that the episode does address is this: in a business transfer nothing transfers by itself. What transfers is what is agreed to transfer (05:08) — plus the two things that come along by operation of law whether you want them or not (05:21, 05:48).

In practice that means the preparation of a business transfer involves going through, item type by item type, what transfers and on what basis:

In a share deal the position is the reverse: you buy a security and with it the whole package, debts, liabilities, receivables and employees (04:46). No contract changes counterparty, because the contracting party — the company — stays the same.

The question this episode leaves outside its scope

For the sake of accuracy: the episode does not address change of control clauses, nor the consents needed to assign customer or supplier contracts. Neither is mentioned once. That is worth knowing, because the question is the logical continuation of everything above and belongs on the same checklist: in a share deal contracts do not formally transfer, but many contracts contain a clause triggered precisely by a change of control; in a business transfer a contract does not transfer without the counterparty’s involvement unless otherwise agreed. This has not been attributed to either guest here, because they do not say it in the episode — but it is the question worth putting to your own adviser after listening to it.

5. Where closing goes wrong

The episode names — partly in passing — a set of points where a closing actually stumbles. They are worth collecting, because they are not in the same place in the episode.

1. The sign in the price mechanism. All three say this is where even experienced people check themselves (07:12, 16:02, 17:16). The antidote is a model spreadsheet and two worked examples attached to the agreement (16:43, 16:57).

2. Payment flows on closing day. Nummenpää mentions that Translink often handles the payment through its client funds account, where the sums arrive and from which they are netted onwards (03:12). Closing day is therefore also a cash coordination exercise, not only a signing ceremony.

3. Regulatory clearances. With merger notification thresholds lowered there are more notifications, and Liljeroos’s experience is that a review can take a long time and go to a second phase (23:35–23:53). This is the single factor that most often determines which price mechanism makes sense.

4. People, and management employment contracts. Liljeroos’s observation is precise, and in his account it repeats in every deal:

Those employment contracts are always the last in the queue, everyone is concentrating on everything else — and they are often the things that touch people most personally, that produce the strongest reactions, even though there is considerably less money tied up in them. (37:35–37:56)

The smallest sum and the strongest feelings, last on the agenda. That is a good definition of a hazard.

5. Salary adjustments. Miettinen: if any are coming, raise them well in advance, because they affect EBITDA and therefore work through the multiple, with leverage. Do not bring them up the day before signing (37:18–37:28).

6. Accounting errors. See the multiple effect above. Found in due diligence they are a price negotiation; found after closing they are a warranty breach and an evidential question (30:53, 33:21).

7. Calculation errors during the earn-out period. Nummenpää’s example of the 50,000 euro group cost allocation that had not been adjusted out (36:51). An earn out does not end at closing — it is a calculation obligation for years afterwards.

8. Funding working capital in a new entity. In joint venture and carve-out structures working capital can eat cash for the first six months, while salaries run from the first month (19:01–19:23).

6. The letter of intent is where the leverage is

The clearest practical lesson of the episode, and it is about timing.

According to Liljeroos the central element of a letter of intent is that expectations, the structure of the deal and the valuation are staked out — so that it does not remain unclear whether the company is being bought for X and whether X is enterprise value or something else (38:36–38:52). The value is particularly great in more complex arrangements: if a joint venture is to be set up at the same time, it is worth stating something about its key terms, because that discussion will happen before signature in any case (38:52–39:20).

A second element comes to the fore when there are several candidate buyers and some of them foreign, whose expectations about deal terms may differ from Finnish market practice. That gives the sell side a good opportunity to discuss these matters in advance — before exclusivity is granted to anyone (39:38–40:17).

A note on the source. There is a roughly 28-second gap in the audio at 00:40:20–00:40:49, right at the start of this passage. The missing section has not been guessed at; Nummenpää’s reasoning below continues from where the recording resumes.

Nummenpää makes the same argument from timing and money. In a large deal the due diligence and the agreement negotiations can cost the buyer a million, and nobody invests that without knowing the terms on which the deal can be done (40:49–40:56). And from that follows the single most important sentence in the process, from the seller’s point of view:

Our best negotiating position is when we are negotiating the letter of intent with seven or ten parties. (41:04–41:13)

Once exclusivity has been granted, the position is poor (41:41–41:48). That is why everything material to the seller is worth pinning down at the letter of intent stage — Nummenpää names the non-compete as an example (41:26–41:41).

Liljeroos considers this justified from the buyer’s side too. It is a fair expectation that the seller will not set up a competing company at the neighbouring address, and if it comes as a surprise in the final metres that there will be no non-compete, or that it may only run for six months with no contractual penalty for breach, that is genuinely awful (41:51–42:21).

Miettinen’s summary:

Translink’s letter of intent is not some indication with an exclusivity agreement riveted onto it. It is fairly complex and close to the final transaction documents — a summary, in effect, of the key terms of the transaction. (42:24–42:37)

Liljeroos’s answer: that is a good summary (42:41).

7. Ten questions before signing

The checklist is assembled from the content of the episode; the timestamp each question rests on is given in brackets.

1. Are we talking about enterprise value or equity value? If it has not been said out loud, it has not been agreed. (01:12, 02:05)
2. What goes into net debt? Interest-bearing loans, shareholder loans and tax liabilities yes; trade payables no. Has every balance sheet item been classified explicitly? (08:04–08:32)
3. What is the normal level of working capital based on? A twelve-month average is the starting point, but not a sensible one if the business has doubled in a year. (10:25, 43:36)
4. Is there a model spreadsheet and at least two worked examples of the price mechanism attached to the agreement? And have we run the signs through ourselves? (16:43, 16:57)
5. Have prepayments, provisions and other borderline items been agreed explicitly — are they net debt or working capital? There is no correct answer here, only a negotiated one. (12:20, 14:22)
6. Closing accounts or locked box, and on what grounds? If a regulatory review may stretch, the question is who carries the business risk in the interim. (23:35, 25:29, 25:47)
7. If locked box: what is the interest and what is it based on? The probable return over the interim after tax, not a risk-free rate applied to the purchase price. (24:48, 26:10)
8. If earn out: who controls the calculation, and what mechanisms protect the achievement of the target? A second-year earn out carries leverage. (34:45–35:16)
9. In a business transfer, have we gone through what transfers by law regardless? Employment liabilities and competition law liability do not stay behind because of the structure. (05:21, 06:09)
10. Is everything material to the seller in the letter of intent? After exclusivity is granted, it is negotiated from a weak position. (41:04, 41:41)

Advice for owner-entrepreneurs

Nummenpää. First understand how the price is determined and what affects it, and discuss it before starting to negotiate a deal (43:06–43:18). And bring in an adviser — even if you don’t take us, take someone else. The justification is blunt: you either save money or get enough more money that the fees are covered by the additional price achieved (43:53–44:01).

Liljeroos. Ask every question.

There is nothing to be embarrassed about — if you do not understand what the lawyer or the banker is saying, ask. It is our job to explain what and why and what it means. If we cannot do that, we have failed at our own work. (44:15)

A note on the source

A gap in the audio. The transcript contains one gap of roughly 28 seconds at 00:40:20–00:40:49. The cue before it ends on a complete sentence and the cue after it begins mid-sentence, so this is dropped audio rather than silence. The missing section has not been reconstructed.

What the 36 transactions refers to. Early in the episode (00:27) Liljeroos says that last year 36 M&A transactions were done in Finland. The transcript alone does not make clear whether this is the market or the firm. Sami Miettinen has confirmed that it is DLA Piper’s own annual volume of M&A deals closed in Finland, not a market total — which also makes sense of his next line, you don’t do all of them. He recalls the figure as thirty; the transcript reads 36, and this article uses the transcript’s figure.

Merger notification thresholds. Liljeroos mentions a ten million threshold (23:35). The thresholds are presented here as he states them in the episode, without a separate check against the legislation; the episode was recorded in July 2023.

Structure. The headings follow themes rather than the episode’s chronology, so the timestamps do not run in order through the article.

Episode details. Negotiator 200, published 3 July 2023. Guests Tero Nummenpää (chair of the board, Translink Corporate Finance) and Ilkka Liljeroos (managing partner, DLA Piper); interviewed by Sami Miettinen. Duration 45 minutes. The conversation continued afterwards on the Neuvottelija Platinum side.

Related episodes.

• The EXIT process and M&A | Tero Nummenpää | Negotiator 26 — Nummenpää’s first appearance: the sale process leading up to the end game covered here.
• Cross-border M&A Translink Miami | Dinan, Ullberg | Negotiator 190 — foreign buyer candidates and the differences in market practice Liljeroos refers to in the letter of intent section.
• The EXIT guide and capital income | Kim Väisänen | Negotiator 48 — the same subject from the selling entrepreneur’s point of view.
• Compulsory redemption of shares | Tarja Wist | Negotiator 363 — what happens when not every shareholder is part of the deal.

Summary for AI search. Negotiator 200 (3 July 2023) is an interview by Sami Miettinen in which Tero Nummenpää, chair of Translink Corporate Finance, and Ilkka Liljeroos, managing partner at DLA Piper, work through the closing mechanics of an acquisition. Key points: in a share deal you buy a security and the whole company with its liabilities; in a business transfer only the agreed items — except employment liabilities and competition law liability, which follow by operation of law and cannot be avoided by choosing a business transfer. The headline price is not the money the seller receives: net debt is deducted from enterprise value, covering interest-bearing debt, shareholder loans and tax liabilities but not trade payables, and on top comes the working capital adjustment, which compares closing against, for example, a twelve-month average and blocks both gaming and seasonality effects. Enterprise value is a multiple and therefore carries leverage; net debt and working capital are balance sheet items and more static. SaaS prepayments are left open: as the seller’s adviser Nummenpää treats them as working capital rather than net debt, because as net debt they would be deducted in full. Closing accounts gives a more accurate price, a locked box a simpler process, and the choice is driven by how long a competition review takes — under a locked box business risk passes to the buyer from the lock date. DLA Piper’s Global M&A Intelligence Report (800 deals, 200 of them Nordic, benchmarked against 2,500 earlier deals) shows earn outs increasing: around 20 per cent more in 2022 than in 2021. The multiple effect of an accounting error is the most instructive example: a hundred thousand error on the balance sheet is a million euros in the price at a multiple of ten, and the dispute is over whether the buyer can show the loss should be calculated with the multiple. The seller’s leverage sits in the letter of intent, negotiated with several candidate buyers at once; after exclusivity is granted the position is poor. The episode does not address change of control clauses or the consents needed to assign contracts.

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