---
title: "An Investment Banker's View — Sami Miettinen on inderesPodi 122"
titleOriginal: "inderesPodi 122: Investointipankkiirin näkökulma, vieraana Sami Miettinen (6.5.2022)"
description: "Sauli Vilén sets out to pull back the curtain on what actually happens behind an IPO, and Miettinen answers in unusual operational detail: how a lead manager is chosen, why the anchor negotiation is the single most important phase, who is allowed to see the order book, what a cut-back mechanism does, why retail allocation ends up at one per cent, and when a banker should blow the whistle rather than drag a company to market. Then M&A — share consideration versus cash, synergy numbers pulled from thin air — and finally fiscal dominance and the euro."
format: "podcast"
show: "inderesPodi"
episode: "122"
hosts: ["Sauli Vilén"]
date: 2022-05-06
duration: "1:32:20"
language: "fi"
original: https://www.youtube.com/watch?v=Y9q3PgY7A38
canonical: https://www.neuvottelija.com/media/inderespodi-122-an-investment-bankers-view/
---

# An Investment Banker's View — Sami Miettinen on inderesPodi 122

Recorded on 6 May 2022, in the middle of a market that had just turned. **Sauli Vilén** frames the
brief plainly: investors only ever see the outcome of an IPO, and the aim of the episode is to
describe what happens in the wings. It is one of the more operationally specific accounts
Miettinen has given, and much of the detail comes from a deal he had just completed.

## Who he is, and how he invests

Twelve years in London — Credit Suisse, SEB — with a career that started at Nordea's predecessor,
where the work included the Nokian Tyres IPO. After the financial crisis he returned to Finland and,
following a short spell in banking, moved to boutique investment banking: mid-sized M&A, IPOs,
public tender offers and financing transactions. The Neuvottelija channel began during covid, when
he could no longer charm anyone over lunch; by the time of recording it was running about 150,000
views a month.

His own portfolio he describes without much romance: cost-efficient index funds with a heavy US
weighting as the bedrock — a position he says he learned the hard way after wandering off into
all-manner-of-asset-market allocation — seasoned with some direct equity and, more exotically, LP
stakes in private equity funds. He explicitly distinguishes himself from Buffett and Munger, whose
central lever he reads as leveraged low-beta quality; his own risk is more growth-shaped, which, he
notes wryly on the day, was taking a beating.

## What an investment banker actually does

His working definition: an enabler of difficult financing transactions — the negotiator who makes a
public tender offer, a company sale, an IPO or a refinancing happen as cheaply and cleanly as
possible. He notes the title is neither official nor protected, and that a rival house once
rebranded people like him as "M&A consultants"; he declines the demotion.

## Choosing the lead manager

Two routes. Either a long-standing relationship carries it — his Norr Hydro mandate came out of IPO
training he had run for Nasdaq Helsinki and the entrepreneurs' association back in 2019, with
Yrjö Trög and his board, and the listing followed on 1 December 2021 — or the company runs a
competitive process and asks several banks to pitch.

What companies actually compare, in his account:

- **References first, and by a distance.** They ring previous clients and ask whether Miettinen or
  Lauriala was as good as his word. The work is intensely personal — a team of four or five people
  — and the question is whether they will finish the job when it turns difficult.
- Price and fee structure, which is almost always success-based.
- **Project management capability.** There are roughly five other advisers besides the bank, and the
  question is whether the bank can assemble an orchestra that plays one tune — and whether it can
  competitively tender the law firm, the communications agency, the subscription venue, and even
  the equity research provider (he teases Vilén that Inderes could be tendered too).
- Whether the bank can convince all those other advisers that the offering will actually complete,
  because everyone is committing scarce resources on a contingent basis.

On valuation in the pitch, his answer is more nuanced than the question. The **size of the offering**
matters more than the headline valuation — Norr Hydro needed eight million, Lapwall five — and the
relationship of that number to company value is secondary. But a pitched price has to come with a
chain of reasoning: comparables, a DCF, the upside case, the effect of the capital structure, an
explicit **IPO discount** as a safety buffer, and then the reality check of whether an anchor
investor would actually commit money at that level. Pitching an inflated number and apologising
later is, he says, a first-order breach of trust — you win the mandate and then have to say *that
was bullshit, here are the real figures*. Some banks avoid the problem entirely by refusing to
participate in beauty parades, which he considers a reasonable strategy if you can only execute one
IPO every six months.

## Selling the offering — the part that is genuinely hard

He is emphatic that the sales work is the most important thing the bank does and the thing it should
be held responsible for. Finland is a capital-poor country, its institutions are, in his phrase,
cranky, and that is a difficult equation for a salesperson. Retail demand is unknowable until the
book opens, so the real effort goes into **anchor and institutional price formation and the
bookbuilding**.

He divides the profession into two: bankers who sell and bankers who execute. Good project managers
are plentiful; the market is short of the selling, negotiating kind, with the occasional individual
who does both superbly.

On scale, he had rung friends at Goldman, Citi and Nomura for an *Arvopaperi* interview in December
2021 and got a consistent answer: below a hundred million they will not turn up, because the
machinery is built for firing thirty million at CalPERS, not for an eight-million float. That is the
gap the boutiques operate in, on foot, knocking on institutional doors themselves.

## The anchor negotiation

The most useful section of the episode. Asked whether the bank walks in with an indicative price and
tests whether it resonates, he rejects both framings — **you sell the business case**. The anchor
negotiation should be taken with complete seriousness; it is arguably the most important phase of
the whole exercise, and the CEO, chair and principal owner should be brought into it, because
institutions will only believe an investment banker's version of someone else's business up to a
point. Send materials in advance for hygiene, then do the one-on-one properly: plan it, rehearse it,
take notes, do many of them, prepare for the disappointment of most saying no, and have a plan B for
who to ring next.

Do anchors set the valuation? Effectively yes, he concedes. They rarely volunteer that a price is
too low; they simply decline unless it comes down. You can play hardball and limp into the retail
tranche with a couple of weak anchors and fingers crossed — he does not recommend it.

His rule of thumb: about **50 % of the offering pre-committed** by anchors, with the flexibility to
cut that back if the case is strong. Norr Hydro had a 25 % cut-back option on anchor demand and used
it; Lapwall had 50 % and used all of it. He notes some arrangers do not build in the option at all,
and that institutions grumble about it — but he considers the whistle-blowing responsibility to be
precisely the arranger's, and refusing to run around finding a few more anchors, on the assumption
that retail will fix it, is the thing you must never do.

## Allocation, and the retail complaint

He takes the retail grievance head-on, from both directions.

The worst case is a book that stays short, in which case everybody gets full allocation — the
winner's curse. His view is unambiguous: *not on my watch*. Blow the whistle, even publicly, and
raise your hand for the error: I could not price it, or sell it, or the market moved.

The other end is allocating a derisory two per cent, which he agrees is unpleasant. The rules
constrain the shape of it: retail cannot be discriminated between — everyone gets cut by the same
proportion — whereas within institutional demand you may treat homogeneous groups differently. Norr
Hydro's institutional threshold was around €94,000; below that you were retail, with a minimum of
about €945. They cut anchors to a 75 % guaranteed allocation, wrote the post-anchor institutions a
very thin book, and pushed everything available to retail — and it was still a disappointment,
because a seven-times oversubscribed eight-million offering is simply arithmetic.

The two anecdotes worth keeping. First: when day-one demand came in, everyone's reaction was *what?*
— followed by a cold sweat and the wish that no more advertising had been booked that week, since
they could not close the book until the weekend. Vilén draws the practical inference for investors:
whether the company is suddenly promoting itself hard is a **leading indicator** of a book that is
not full. Miettinen doesn't dispute the logic, while noting they did not cut marketing.

Second: who can actually see the book building? The bank and the board — often not even management.
Nobody else. It is inside information, there are strict information barriers, an insider register
from the intention-to-float onwards, and telling an anchor how the book looks would be plainly
illegal. He invokes Michael Milken and Drexel Burnham as the reason these rules exist.

On the guaranteed-allocation-plus-cut-back mechanism, Vilén asks why everyone doesn't use it.
Miettinen's answer is the anchors' view: having just made a 31 % first-day gain, they would happily
have taken another million or two. It's a negotiation.

Norr Hydro ended with **12,000 shareholders** and over 30 % free float, which he contrasts with
offerings done to a bare 300-holder minimum and a 10 % free float — and he can't resist noting
Inderes' own float in passing.

On **anchor discounts** he is blunt: staff discounts are fine, anchor discounts are sly. Anchors
should come for love of the game and fight for the same discount for everybody.

## Primary versus secondary — why selling is demonised

In small Finnish offerings, secondary selling is rare: **below €10 million, only about 5 % of
offerings include a single share sold by an existing owner**. In large ones it is routine, typically
a private equity holder exiting tens of millions.

The theory says it shouldn't matter — if the prospectus discloses everything material, you hold the
same information as the seller and are in the same boat, so primary and secondary should be
equivalent, with the caveat that a company shouldn't raise cash it can't deploy. In practice the
market reads a selling principal as an insider signal — *he knows where the bomb is* — and a pure
secondary offering as a bad smell outright. Miettinen thinks it is over-demonised, but notes the
practical consequence: Finland's small institutions will decline for that reason alone. In a small
offering there is also a real objection — an eight-million company can easily waste the powder.

The workarounds all come after the lock-up: block trades rung around to institutions under NDA at a
couple of per cent discount, drip feeds with disclosure as you go, or borrowing against the shares
instead of selling. He notes all of them require selling the case again, and all carry the same
signalling problem.

## What counts as a successful IPO

Criterion one: the offering is fully subscribed with healthy oversubscription. Beyond that, the
literature suggests a **10–15 % IPO discount** and there should be a first-day gain — not 30 %,
which is a pricing miss for other reasons. But the measure he actually cares about is **aftermarket
performance relative to the index some months later**. Norr Hydro priced at 3.15 and was trading
around four while the market fell — that, he says, matters more than the pop.

The second half of it is the company's own responsibility: delivering what it promised, with the
bank helping to set expectations at a sane level. As certified adviser he and Jari Lauriala sit in
the board meetings and hear the guidance discussion — Norr Hydro had issued two upgrades by then,
which he treats as evidence the original guidance was not tactically sandbagged.

He is unsparing about the failure mode: dragging a death-rattling zombie to market because you
mis-sold it is extremely irresponsible, and it should be attributed to a person, not a house —
*that fellow hauled this wreck to the exchange, let's watch his track record.* Retail may not know
who led an offering, but Finland's handful of institutions certainly remember, and the door stops
opening.

## The IPO boom, and the pipeline

The numbers he gives: **7 offerings in 2019, 7 in 2020, 31 in 2021**, including main-list transfers.
By December 2021 the market expected around 15 by this point in 2022; there had been four. He reads
the spring as a savage disappointment relative to the pipeline — but also as evidence that Finnish
arrangers have integrity and pulled the handbrake rather than shipping junk. The material has not
disappeared; some of it will end up in trade sales instead. His guess for the year, with the caveat
that it depends on rates being pushed through the market and Finland joining NATO removing the
country risk: about fifteen. Anchor investors, he adds, are extremely cynical at the moment, and
without the foundation stone there is no point going.

## M&A

The mandate split is roughly 90 % sell-side, 10 % buy-side, for a mercenary reason: there is one
seller and many losing bidders, so sell-side work actually closes.

His worked example is **Metso and Tamfelt** in 2010, where he advised Metso. It was executed as a
share exchange, negotiated substantially at chair-to-chair level with Mikko von Frenckell as
Tamfelt's large owner, and Metso's rising share price during the process helped convince the other
side to take paper. His point is structural: share consideration **shares the synergies and aligns
the risk**, whereas most criticised failures are cash deals with too much premium paid out of the
buyer's hard cash — a distinction he says people routinely miss.

The second example is **Nordic ID**, which he describes as rescuing: a directed issue in the middle
of covid, then a sale of the whole company to Brady Corporation by cash tender offer that cleared
above 90 %. The nuance he highlights is the non-public phase, where they collected irrevocable
support from over half the existing shareholders under confidentiality before announcement — and
the professional skill involved in asking someone whether they are willing to receive inside
information without blurting out the case if they say no.

On why most acquisitions fail from the buyer's side, his first answer is self-serving and he says
so — no investment bank in the room. The real ones: organisations doing their first acquisition and
learning on the expensive one; falling in love with secondary value creation; and failing to respect
the market price as the best available view. Synergies in a spreadsheet are far too easy: one plus
one turns out not to exceed two.

He is caustic about quantified synergy claims — Stora Enso selling its North American operations to
NewPage with something like 8 % of target revenue in synergies, a number he says was obviously
pulled out of thin air. A listed company must give sufficient and accurate information, so it can't
be a PowerPoint slide resting on nothing; but over-optimism about sales synergies in particular is
endemic. His preferred combination is **high synergies with a low multiple**, which leaves room to
be wrong; a high multiple resting on large synergies is a red flag.

What he looks at as an investor when a portfolio company announces a deal: does management have
acquisition experience and does this belong to their strategy, or is this a first-timer improvising;
does it complete, and is there shareholder support and a board recommendation; are there conditions
that dump competition-authority risk onto shareholders — his examples being the Konecranes–Terex
saga and Outokumpu buying Thyssen assets without a withdrawal clause; the price relative to where
the buyer itself trades; and the consideration, with a preference for share deals.

He also mentions, with visible pleasure, a study he built at a previous bank showing that every
sell-side mandate they executed had a positive market-adjusted share price reaction — which
irritated his colleagues as showing off, and which he thinks ought to be part of an adviser's
references.

## Fiscal dominance and the euro

The closing third, and the theme he was pushing that year.

**Fiscal dominance** he defines as the stranglehold inflation — and governments — have taken on
central banks. The Fed had raised that week while the ECB sat at zero, and the ECB cannot follow,
because the euro area is nineteen heterogeneous countries and Italy's capacity to service its debt
at another one or two per cent is poor. A political central bank will not risk pushing significant
member states into restructuring, so it is not independent.

But he thinks the escape isn't available either. If the ECB won't raise, nobody will lend at a minus
six per cent real rate, so the market rate on actual transactions still respects inflation — what
drops instead is the **volume of transactions that clear**. It leaks: Italian yields rise regardless.
His forecast is the short end nailed down and raised far too slowly, inflation overshooting, and
refinancing happening at negative real rates in a lender's market. He notes the Fed was about to
start shrinking its balance sheet while the ECB had not even begun, leaving a double problem in
Europe, and that with euro-area debt at an average duration of 8.2 years, ending QE today would
still take years to work off the balance sheet.

The end states he lays out are three: honour the market price; restructure, as Greece did to the
tune of a hundred billion in 2012, which requires major political architecture change; or keep
mutualising — recovery-fund-style joint debt that reliably delivers negative real returns and moves
money from north to south, which is federalisation in the financing sense. If nobody volunteers, the
black spot stays with the ECB, which then has to invent stories about why guaranteed losses aren't
losses. He also notes the hokum option: convert what the central bank holds into hundred-year
zero-coupon paper and make it someone's problem in 2122.

His own proposal, from the 2015 Libera book *Euron tulevaisuus*, is a step back towards the ECU:
with a digital central bank currency arriving anyway, give each country its own digital wallet,
build the infrastructure so those wallets can find a local market price, and compute the general
euro as a capital-key-weighted sum across the nineteen. That preserves the euro as the unit in which
decades of existing contracts and derivatives settle, while adding pressure valves for
country-specific conditions — Italy could be allowed to inflate away its refinancing risk;
Netherlands could strengthen.

Asked the odds the euro area is intact in ten years, both he and Vilén give a low probability of
breakup — there will certainly be a unit called the euro, since some liabilities are effectively
perpetual; the open question is the infrastructure that clears whether a euro is worth one euro
everywhere. He adds that the new cold war has probably sealed it, because the politics of transfers
look different when everyone is being pushed to pull the same rope.

## How he was positioned

Never bet against America, still. No cash on deposit, and no bonds — deliberately omitted, because a
rising yield curve makes fixed income a guaranteed loss, which he notes is also exactly why nobody
wants to be Italy's lender. Cost-efficient ETFs weighted to the Nordics and the US and away from
the DAX and euro-area exposure, his own property, a UK pension pot from the London years with a
global equity allocation, private equity LP stakes, some real estate funds of a more sophisticated
kind, the €50,000 equity savings account used in full and kept in growth rather than dividend
names — and, through gritted teeth after his London friends had called the value rotation a year
earlier, a little value.

Original recording (inderesPodi): https://www.youtube.com/watch?v=Y9q3PgY7A38

---

Cite as: Sami Miettinen, guest on inderesPodi 122 — An Investment Banker's View — Sami Miettinen on inderesPodi 122, 2022-05-06, https://www.youtube.com/watch?v=Y9q3PgY7A38. Record: https://www.neuvottelija.com/media/inderespodi-122-an-investment-bankers-view/.