1 00:00:00,090 --> 00:00:04,260 This is essentially where the aspiring entrepreneurs get to put their management 2 00:00:04,260 --> 00:00:10,110 skills [unclear], so as CEOs of these acquired businesses they will be trying proliferation 3 00:00:10,110 --> 00:00:19,050 activities, increasing operational efficiency. One would think that it's always good to buy 4 00:00:19,050 --> 00:00:23,820 sort of a highly valued and high growing companies and be the CEO and owner of 5 00:00:23,820 --> 00:00:31,830 a unicorn or highly skilled technology value, or software as a service. However, this is 6 00:00:31,830 --> 00:00:38,550 not what the program is about. You actually, the speed [unclear] is more in the 7 00:00:38,550 --> 00:00:43,920 boring end of things, so you want to have a company which is relatively inexpensive, 8 00:00:43,920 --> 00:00:49,680 in addition to this, potential like-so-on effects of the of the market in general. 9 00:00:49,680 --> 00:01:01,560 Hello, this is Sami Miettinen. I run this channel called Neuvottelija, or Negotiator, and in this 10 00:01:01,560 --> 00:01:12,210 episode I show how to negotiate an acquisition in a TrueNorth program, entrepreneurship through 11 00:01:12,210 --> 00:01:22,860 acquisition. My hosts Gautam Basu and Mikko Järvinen, who will first explain the ETA concept, and 12 00:01:22,860 --> 00:01:30,570 then I will demonstrate how negotiations can be used to acquire company at the reasonable 13 00:01:30,570 --> 00:01:38,460 price, especially taking advantage the change circumstances in the current corporate finance market. 14 00:01:38,460 --> 00:01:46,560 will go through a couple of basics in negotiation, first showing an evaluation and relative price 15 00:01:46,560 --> 00:01:52,800 work and how a weak negotiation arc is formed, then I will go through a couple 16 00:01:52,800 --> 00:01:59,940 of information gathering tactics and how to signal in negotiations. This will be later on 17 00:01:59,940 --> 00:02:09,730 followed up with the rest of the training, where people have the opportunity to ask me questions. 18 00:02:09,730 --> 00:02:15,970 some negotiations. If you're listening to this podcast, I would certainly recommend you watch 19 00:02:15,970 --> 00:02:26,230 also the YouTube version of it, because of the slide I will be using throughout. Welcome to the 20 00:02:26,230 --> 00:02:33,070 first ever TrueNorth Search webinar. My name is Gautam Basu and I'm the managing partner at True 21 00:02:33,070 --> 00:02:39,670 North Search. We originally planned to hold this event at the Aalto Business School, but due to 22 00:02:39,670 --> 00:02:46,870 the COVID-19 situation we decided to leverage the principles of agility and adaptability in business 23 00:02:46,870 --> 00:02:53,020 operations, and we quickly adapted to the remote online format, which I think many of you have 24 00:02:53,020 --> 00:02:58,990 already started doing, but that being said, I don't think this will detract from the value we'll get 25 00:02:58,990 --> 00:03:05,200 today because we have an exciting presentation by Mr. Sami Miettinen from Translink Corporate Finance 26 00:03:05,200 --> 00:03:12,670 on the topic of negotiation for acquisition entrepreneurs. Negotiation is one of the key 27 00:03:12,670 --> 00:03:18,460 skills to develop if one wants to be successful in entrepreneurship through acquisition, from 28 00:03:18,460 --> 00:03:23,710 negotiating a transitional service agreement with the seller, to negotiating the final purchase price 29 00:03:23,710 --> 00:03:32,500 of a transaction. The art and skill of negotiation is a core competency for this career path, so we're 30 00:03:32,500 --> 00:03:38,830 thrilled to have Sami present for us this evening, but before we dive into this exciting presentation, 31 00:03:38,830 --> 00:03:45,190 a couple of ground rules. So number one, everyone on this call, please mute yourself so we minimize 32 00:03:45,190 --> 00:03:52,750 all background noise, and number two is, if you have a question for the presenter, then please use the 33 00:03:52,750 --> 00:03:59,680 chat function in Zoom to ask your question, and I will monitor the chat area during the presentation, 34 00:03:59,680 --> 00:04:07,810 and then we can ask the presenter in a timely manner. With that being said, I'd like to turn 35 00:04:07,810 --> 00:04:13,690 it over to my associate Mikko Järvinen, will give us a quick review of the ETA model for those of 36 00:04:13,690 --> 00:04:19,690 you that may not be familiar with that, and once he's completed, then we'll turn it over to Sami. 37 00:04:19,690 --> 00:04:29,740 So Mikko, the floor is yours. Thank you, Gautam. Just a moment, I will be sharing my screen for you, and 38 00:04:29,740 --> 00:04:42,670 I think I have now accomplished that successfully. You see my screen, right? Excellent, good. So for you 39 00:04:42,670 --> 00:04:50,260 that are first-time attending these, our events in general, or new to the entrepreneurship 40 00:04:50,260 --> 00:04:54,730 through acquisition model, I have just a couple of slides to actually explain what all this is 41 00:04:54,730 --> 00:05:00,430 about. So, uh, essentially entrepreneurship through acquisition isn't something very 42 00:05:00,430 --> 00:05:09,700 new. Businesses have been traded probably for as long as there has been people around, but 43 00:05:09,700 --> 00:05:13,690 this specific approach, this specific model of entrepreneurship through acquisition, acquisition 44 00:05:13,690 --> 00:05:22,420 has originally developed in the US by a gentleman called [unclear] in the Stanford University in 45 00:05:22,420 --> 00:05:29,530 mid-80s. Essentially, we see it as a career path where an aspiring entrepreneur can search for, 46 00:05:29,530 --> 00:05:37,900 acquire, lead, operate, and grow an existing business. So essentially, an alternative to your startup path, 47 00:05:37,900 --> 00:05:47,920 where businesses are created from basically zero. Maybe the one key aspect of the ETA model is 48 00:05:47,920 --> 00:05:56,800 three main principles it has. So essentially, there are the jockey, the horse, and trainer. Jockey being 49 00:05:56,800 --> 00:06:03,910 the aspiring entrepreneur starting the search to acquire an established target business. The horse 50 00:06:03,910 --> 00:06:10,450 being an established business that is acquired, and the trainer, that can be an investor, advisor, 51 00:06:10,450 --> 00:06:16,870 or an accelerator that is supporting the jockey of the journey. Traditionally, the jockeys have 52 00:06:16,870 --> 00:06:23,560 come from, have been a freshly graduated MBAs, but more recently we have seen people more 53 00:06:23,560 --> 00:06:29,530 experienced people taking this role, typically people with a long management experience, and 54 00:06:29,530 --> 00:06:37,420 maybe looking for an alternative to the corporate life. The horses are typically companies that have 55 00:06:37,420 --> 00:06:42,820 already existing revenues, cash flow, customer, suppliers, so something very different to your 56 00:06:42,820 --> 00:06:50,470 startup world, and the trainer can be an investor, advisor, or in the case of TrueNorth Search, an 57 00:06:50,470 --> 00:06:55,840 accelerator, which is there to actually support the jockey in order to fight them through the 58 00:06:55,840 --> 00:07:02,620 pool horse and have a, what we would call, a good jockey-horse fit, to move on, develop that business. 59 00:07:05,910 --> 00:07:13,260 So the four key steps of the ETA process. So as you can see, the timeline on the top row, 60 00:07:13,260 --> 00:07:18,780 the whole duration for the ETA process is estimated to be something in between five 61 00:07:18,780 --> 00:07:25,890 years to 10 years, and to get this started there are actually three main variations. There is the 62 00:07:25,890 --> 00:07:35,010 [unclear] variation, where aspiring entrepreneur essentially raises funding for these [unclear] and 63 00:07:35,010 --> 00:07:41,370 acquisition stage, so essentially project funding for the duration of 12 to 8 months, to search and 64 00:07:41,370 --> 00:07:48,060 find an ideal target. Second option is the self-funded search, where the searcher covers those 65 00:07:48,060 --> 00:07:53,400 costs out of his or her pocket, and thirdly there is the option of partnering up with 66 00:07:53,400 --> 00:08:01,500 an accelerator, which can essentially help upon some of the resources that are needed for this stage. 67 00:08:03,310 --> 00:08:09,730 A certain acquisition stage, that is something very, I would say, unique for the Entrepreneurship through 68 00:08:09,730 --> 00:08:15,370 acquisition process, so what the searcher will do in this stage is that he or she will screen around 69 00:08:15,370 --> 00:08:22,360 500 potential targets, meet sellers, conduct due diligence, arrange finance, negotiating approaches, 70 00:08:22,360 --> 00:08:29,230 and acquires only one target out of those 500 potential ones, and the fourth stage's operating 71 00:08:29,230 --> 00:08:34,630 [unclear]. This is essentially where the aspiring entrepreneurs get to put their management skills 72 00:08:34,630 --> 00:08:40,330 in use, so as CEOs of these acquired businesses they will be trying proliferation activities, 73 00:08:40,330 --> 00:08:50,510 increasing operational efficiency, and grow the revenue of the business, and finally there is 74 00:08:50,510 --> 00:08:56,480 the exit stage. Typically some type of liquidity event happens in four to seven years from the 75 00:08:56,480 --> 00:09:02,390 acquisition, and there are essentially two paths that can happen. The company can be acquired by a 76 00:09:02,390 --> 00:09:10,190 third party, or if the entrepreneur decides, he can choose the path of recapitalisation, where he 77 00:09:10,190 --> 00:09:16,430 essentially buys the investors out at this stage and may continue running the business for the rest 78 00:09:16,430 --> 00:09:23,000 of his life, if that is what — what the entrepreneur is actually looking for. So I guess this sums up 79 00:09:23,000 --> 00:09:31,540 pretty much the four steps of the ETA process, and I guess if you have some questions, please put them 80 00:09:31,540 --> 00:09:37,240 on the chat, and maybe we'll come back to that the latter part of the presentation, but having 81 00:09:37,240 --> 00:09:45,820 said this, I think I would be happy to hand over the presentation. [unclear] 82 00:09:52,620 --> 00:10:12,720 So we'll — you can see, what — the share again? No — yes — presentation. There we go, very good, thanks 83 00:10:12,720 --> 00:10:22,860 for inviting here. So I'm doing this pro bono, and my background is, I'm investment banker. 84 00:10:22,860 --> 00:10:30,120 I spent half of my career in London, 13 years in Credit Suisse and CB, and [unclear] Capital, 85 00:10:30,120 --> 00:10:35,970 and then I have worked in [unclear] banking and corporate finance in in Finland, in various 86 00:10:35,970 --> 00:10:43,470 institutions. Then, that's the sort of side [unclear] step I have. I have been the CEO of Nordic Trustee, which 87 00:10:43,470 --> 00:10:51,300 [unclear] bondholders' rights in the Finnish bond structures. I have [unclear] from Aalto, and have 88 00:10:51,300 --> 00:11:00,780 an MBA from USA, and why I'm here talking about the negotiation is because I have, together 89 00:11:00,780 --> 00:11:08,580 with [unclear], published the book — oh, you know, [unclear] — which is because it's a 90 00:11:08,580 --> 00:11:14,520 quite a short, a small market, it's the market leader in that negotiation literature in Finland, 91 00:11:14,520 --> 00:11:21,630 and here are my [unclear], if you want to reach me out. So I was asked to discuss a couple 92 00:11:21,630 --> 00:11:29,520 of key concepts in negotiation and how they tie up to this ETA model of acquiring business 93 00:11:29,520 --> 00:11:38,550 and becoming the CEO. First of all, my day job is, I'm a corporate financier, and TransLink 94 00:11:38,550 --> 00:11:43,530 Corporate Finance does mostly sell-side. There, many businesses, so we would typically be on 95 00:11:43,530 --> 00:11:50,400 the selling side, whereas the participants in this ETA program would be buying, but from 96 00:11:50,400 --> 00:11:57,720 time to time we do buy-side advisory, so I know the process and how the financing ties to it. 97 00:11:57,720 --> 00:12:04,350 So those are the two areas of investment banking services which are relevant to the ETA program, 98 00:12:04,350 --> 00:12:12,590 the buy-side M&A advisory and sell-side advisory, and if we go on to how those two services applied 99 00:12:12,590 --> 00:12:19,220 to the ETA, first we have to look at the outside, the environment, and that's of course pretty grim. 100 00:12:19,220 --> 00:12:26,030 So this is a timeline of the fear index of weeks, and this measures the implied volatility and the 101 00:12:26,030 --> 00:12:35,480 options in the Chicago Board of Options, and we have passed the previous all-time high peak at 102 00:12:35,480 --> 00:12:43,280 2008, when the Lehman Brothers collapsed. So this is a similar-magnitude event we are witnessing, 103 00:12:43,280 --> 00:12:51,680 COVID-19, and that's of course pretty bad news for most of the humanity, but this could actually be a 104 00:12:51,680 --> 00:13:00,560 pretty good [unclear] point in time to look at this ETA model, because asset valuations are down, 105 00:13:00,560 --> 00:13:06,440 and at some point they will obviously go up, so it's a good, good point to start. 106 00:13:09,500 --> 00:13:19,040 And if we, in general, one would think that it's always good to buy sort of a highly valued and 107 00:13:19,040 --> 00:13:25,610 high-growing companies and be the CEO and owner of a unicorn or highly skilled technology value, or 108 00:13:25,610 --> 00:13:34,640 software as a service. However, this is not what the program is about. You actually, the speed spot 109 00:13:34,640 --> 00:13:39,440 of acquiring companies is more in the boring end of things, so you want to have a company 110 00:13:39,440 --> 00:13:47,180 which is relatively inexpensive, in addition to this potential like-so-on effects of the of the 111 00:13:47,180 --> 00:13:54,320 market in general, and you might also want to push down the price with these levers, which discount 112 00:13:54,320 --> 00:14:00,290 the price further: illiquidity, no control, lack of governance, and value leakage, and the other [unclear] 113 00:14:00,290 --> 00:14:07,460 so if you do this right you can have the possibility of getting into the business at the 114 00:14:07,460 --> 00:14:13,130 low point, at the discount, and then you can exit at the more [unclear] times, utilizing the 115 00:14:13,130 --> 00:14:20,540 premiums available in the, when the market recovers, but just as a reminder if you're looking to do 116 00:14:20,540 --> 00:14:31,670 this program to buy the next Supercell, this is probably not for you, and I, an example how people 117 00:14:31,670 --> 00:14:40,850 value companies. They look at the enterprise value over EBITDA. This is [unclear], 118 00:14:40,850 --> 00:14:48,140 [unclear] a multiple, which means that how many times the value of the acquired business is 119 00:14:48,140 --> 00:14:54,740 a multiple of your current cash flow, and as we can see in this picture, in the engineering 120 00:14:54,740 --> 00:15:01,580 sector, of big blue-chip engineering companies in the Nordic area, the [unclear] typical multiple has 121 00:15:01,580 --> 00:15:08,630 been something like 10 times or even over it, and now it has collapsed here, in the, in the current 122 00:15:08,630 --> 00:15:16,040 environment, and this is quite important, because this determines your entry point. If you end at 123 00:15:16,040 --> 00:15:21,920 the low multiple and exit in the high multiple, that's good, otherwise then you have to, of course, 124 00:15:21,920 --> 00:15:28,220 improve the profitability to fight against this, the dropping multiple, so it's a good time 125 00:15:28,220 --> 00:15:35,690 to do deals, probably pretty soon. Of course, if the market keeps going down, then that's, that's 126 00:15:35,690 --> 00:15:43,910 still bad timing, but we don't know really, and here's the data, as a part of this program you 127 00:15:43,910 --> 00:15:49,250 would be looking at the numbers like this, and in the engineer sector you would look at not only 128 00:15:49,250 --> 00:15:54,080 the relative valuations, but you would look at the sales growth of the sector, the profitability of 129 00:15:54,080 --> 00:15:59,660 the sector, and then you would look at the sort of a smaller, much smaller than this actually, of 130 00:15:59,660 --> 00:16:07,190 the market, not the big ones. This is the enterprise value, Atlas Copco has an enterprise value of [unclear] 131 00:16:07,190 --> 00:16:14,270 thirty-four billion euros. Obviously this program is not looking after by Atlas Copco, and it's not 132 00:16:14,270 --> 00:16:19,340 even looking at the [unclear], but they're small, much smaller companies. I think, Gautam, you 133 00:16:19,340 --> 00:16:23,930 mentioned that this [unclear], something like a couple of million euros to twenty million 134 00:16:23,930 --> 00:16:30,780 euros, if that's right? — That's correct. And then you look at these discounts, which I mentioned in the 135 00:16:30,780 --> 00:16:39,150 previous slide, to sort of enhance your entry point, buy low, sell high. Okay, now we move to 136 00:16:39,150 --> 00:16:46,770 the negotiations, so this is a negotiation theory. My fear is that amateurs operate in sort of 137 00:16:46,770 --> 00:16:54,600 a narrow corridor of giving up. This would mean that you're basically a too-nice guy, you give up 138 00:16:54,600 --> 00:17:02,910 anything that the other guy does, and then if you are then a tough guy, you go for competition 139 00:17:02,910 --> 00:17:08,010 mode and try to sort of capture all, all evaluate yourself, and leave nothing to the other, poor, guy. 140 00:17:08,010 --> 00:17:15,420 And then you might hug all, and yet go something in the middle, but that's bad, that's, that's an 141 00:17:15,420 --> 00:17:22,380 even negotiation, a sort of master negotiator looks at this completely differently. Say, you either 142 00:17:22,380 --> 00:17:30,960 do this classic win-win, so both parties win big, or, which is equally important, you do 'no deal', 143 00:17:30,960 --> 00:17:38,790 and both look for a better deal elsewhere. Of course, it's provided time-appropriate 144 00:17:38,790 --> 00:17:46,530 to these outcomes, but as a mindset you shall try to structure a mutually satisfactory deal, or then 145 00:17:46,530 --> 00:17:55,710 you pretty quickly look for options outside the theater, had the play, and as a sort of, if you're 146 00:17:55,710 --> 00:18:03,030 interested in how this is done, on the exit market, there's a pretty good Finnish book, 'Exit', which 147 00:18:03,030 --> 00:18:12,060 has 15 stories, or half, successful entrepreneurs who have sold their companies, or listed them, or 148 00:18:12,060 --> 00:18:18,090 otherwise exited. Incidentally, three of the deals are TransLink Corporate Finance deals, 149 00:18:18,090 --> 00:18:25,440 shown here, and also both authors have actually exited their businesses, [unclear] and 150 00:18:25,440 --> 00:18:38,220 the [unclear] group, with our help. Then, if you look at how a typical bad negotiator works, this 151 00:18:38,220 --> 00:18:45,840 is the sort of caricature of negotiation, and when you don't know how to negotiate, you first look at 152 00:18:45,840 --> 00:18:53,640 what to do before you enter the negotiation, at off the table, we call it the dialogue-planning phase, 153 00:18:53,640 --> 00:19:00,690 and you are aided positively, the trust is here, positive, and distrust, this negative. You are aided 154 00:19:00,690 --> 00:19:06,960 by your reputation, the references, hopefully you have good ones, they could be bad as well, if you 155 00:19:06,960 --> 00:19:11,730 have a bad reputation, and then there's of course some kind of pre-meeting resistance, because people 156 00:19:11,730 --> 00:19:18,540 don't know you necessarily before the meeting, you enter the negotiation without agenda, you somehow 157 00:19:18,540 --> 00:19:26,640 scrape till a deal, you start doing the transaction, and you can see here it will go badly, and what 158 00:19:26,640 --> 00:19:34,200 happens is, you, to first, called first impression, or you skip that altogether, you're being rude, you try 159 00:19:34,200 --> 00:19:41,100 to then build a relationship and perhaps exceed to push the positive energy up, then you perhaps 160 00:19:41,100 --> 00:19:47,730 go to this bargaining model like I showed in the previous slide, and then you maybe have a high 161 00:19:47,730 --> 00:19:52,770 moment where there, the parties misunderstand the agreement and think they have a good deal, but 162 00:19:52,770 --> 00:19:58,380 then that was all a fake, then time is running out, that's quite important, negotiation, you have 163 00:19:58,380 --> 00:20:05,280 approaching panic, and you maybe want to do a deal anyway, pretty lousy deal, and once you 164 00:20:05,280 --> 00:20:10,500 do a lousy deal, you have a declined trust carry-forward, but you essentially ruin your reputation, the 165 00:20:10,500 --> 00:20:18,000 references, and you start from the bad foot when you do the deal, that's party again, or with the 166 00:20:18,000 --> 00:20:26,310 sort of close circle of people, because people do tell about this, bad experiences, so don't do this. 167 00:20:26,310 --> 00:20:34,500 Okay, what do you, what should you do then? You should first do a bit, like the previous slide, no agenda, 168 00:20:34,500 --> 00:20:45,000 that's, that's bad, so do your agenda. Then you, you should obviously at some time, wisely, so you should 169 00:20:45,000 --> 00:20:52,320 look at what you're looking at here. If you take the ETA program goals here, you are probably looking to 170 00:20:52,320 --> 00:21:00,900 buy your company cheaply and buy a good one where you enjoy working. You look at what the other party 171 00:21:00,900 --> 00:21:07,230 is looking at, they maybe want to get cash or some of the other benefit, to continue, good new owner. 172 00:21:07,230 --> 00:21:14,310 Then you look at this win-win deal, like if you can do the combined deals where everybody 173 00:21:14,310 --> 00:21:21,030 wins, and then you do quite a lot of this, like, if you have to walk away, what 174 00:21:21,030 --> 00:21:26,880 would be the new [unclear]? Well, then this ETA program you actually do a lot of this, so you create a lot 175 00:21:26,880 --> 00:21:33,540 of walk-away options, you look at the many, many new-partner options, so, so you sort of repeat this 176 00:21:33,540 --> 00:21:41,250 circle with the ETA, and that from time to time you do this, compromises, that's a deal, but often 177 00:21:41,250 --> 00:21:47,790 people don't do this, and the beauty of the ETA is you do create a lot of backup options, because you 178 00:21:47,790 --> 00:21:55,050 keep repeating this process with the many companies. Then a couple of concepts I'm going 179 00:21:55,050 --> 00:22:03,330 to talk about up later on, on this presentation. We defined four levers of negotiation, their power, 180 00:22:03,330 --> 00:22:10,620 analytics, interaction, and principles, and here we define them, in the form of first splitting 181 00:22:10,620 --> 00:22:17,190 the pie in the context, so if this is your pie, or cake, you have to split it, like, who gets the 182 00:22:17,190 --> 00:22:24,120 benefit, added value of the deal, hopefully you'll get more of it, and this is your, just, power tricks 183 00:22:24,120 --> 00:22:31,380 to, and negotiation handles, to achieve this. Then you have the analytical skills, you make a bigger 184 00:22:31,380 --> 00:22:39,030 pie, you add elements to the deal which are not obvious, if you're smart and clever, and once you 185 00:22:39,030 --> 00:22:46,620 have achieved this, pick up, how you deliver in negotiation, so the other party, even if they get 186 00:22:46,620 --> 00:22:52,530 a smaller pie, they feel good about it, because here you are handling the social interactions well, and 187 00:22:52,530 --> 00:22:58,440 then, of course, the reputation follows all through this. So if you're just doing this mechanically, and 188 00:22:58,440 --> 00:23:04,020 then trying to sort of secure the other party than they are, you're not doing it right, so you 189 00:23:04,020 --> 00:23:09,600 had to have consistent principles, how you negotiate, and how you build a reputation over time, so that 190 00:23:09,600 --> 00:23:19,920 this cake-baking business is for the long term, not just one-off, and on these concepts, we have tons 191 00:23:19,920 --> 00:23:25,260 of these concepts in our book, and in a negotiation training, we get through this ETA, but if we pick 192 00:23:25,260 --> 00:23:31,590 up on it, there's quite a lot of power elements, by the way, I'm not going to cover them here today, 193 00:23:31,590 --> 00:23:39,870 but you could use studies, ranges, and archetypes in negotiation, and you can use indirect power and 194 00:23:39,870 --> 00:23:47,880 direct power to, to get forced decisions and walk away, but here we're mostly talking about the 195 00:23:47,880 --> 00:23:53,700 analytics, so you have the time management is quite key, like how you handle the time element. I 196 00:23:53,700 --> 00:24:00,120 touched upon the price earlier on, but there's a whole lot of stuff on the game theory and how to, 197 00:24:00,120 --> 00:24:07,380 how to sort of find the best value in the deal. Then the interaction, I'm gonna talk a bit more 198 00:24:07,380 --> 00:24:13,860 about that, so how you deliver your message, this is done through a process called signaling and 199 00:24:13,860 --> 00:24:19,980 sharing the information, and then what's very, very important is the negotiation-team composition, and 200 00:24:19,980 --> 00:24:26,040 with the ETA, you cannot get the benefit of the team, because we will be coaching, coaching, you 201 00:24:26,040 --> 00:24:32,130 and this, this program, and then these principles, in the long term you need to have a reputation, 202 00:24:32,130 --> 00:24:38,280 and trust and ethics and even algorithms, how you do things in a clever way. 203 00:24:40,610 --> 00:24:47,360 Okay, so if you look at the signaling, so if you, you have to sort of get in the negotiation, you 204 00:24:47,360 --> 00:24:53,900 had to acquire information, and you have to deliver information to the other party. So if you use the 205 00:24:53,900 --> 00:25:00,950 analogy of Texas Hold'em, you have five open cards eventually, and then you have two in reserve, and 206 00:25:00,950 --> 00:25:11,900 it's nice that they're aces, so you maybe win this one, but then there was an American, this is, this is 207 00:25:11,900 --> 00:25:16,790 a foreign minister, I think Donald Rumsfeld, and he had this fantastically misunderstood 208 00:25:16,790 --> 00:25:24,830 saying of the, 'no-no's', unknown unknowns, and basically that's actually a very smart speech 209 00:25:24,830 --> 00:25:31,910 he had. So when you tried to figure information, there are things you know that you know, your 210 00:25:31,910 --> 00:25:38,540 basic facts, there are things you know that you don't know, and then there are this Black Swan 211 00:25:38,540 --> 00:25:43,610 territory, they're unknown ones, those things you don't even know, don't know that you don't know 212 00:25:43,610 --> 00:25:50,330 them, and if you can uncover this Black Swan type of information, then that can be hugely powerful, 213 00:25:50,330 --> 00:25:58,220 they can be like key negotiation levers. So if you know, for example, if you're trying to buy a 214 00:25:58,220 --> 00:26:07,220 company, and then you, through method or through luck, you learn that then there is a certain 215 00:26:07,220 --> 00:26:14,840 need for them to sell within a month, the business, and it's not obvious to everybody, this is, there's 216 00:26:14,840 --> 00:26:21,650 this thing, by a kind of time pressure, then that's, that's an example of a Black Swan event which you 217 00:26:21,650 --> 00:26:28,910 can use to your advantage. So, but then you signal that, this sort of open cards, in this ETA program, 218 00:26:28,910 --> 00:26:35,090 you would say, be pretty open about that you want to acquire a company, you want a good one with 219 00:26:35,090 --> 00:26:41,270 which grows and it's profitable and can disrupt the competition, and you, you want to partner for a 220 00:26:41,270 --> 00:26:49,670 long term, so it's perfectly all right. [Music] Openly talk about this. What you don't want to 221 00:26:49,670 --> 00:26:55,790 do, let's say this company's in the lovely city of Pori, but you, you and your family are in 222 00:26:55,790 --> 00:26:59,510 Helsinki, so you don't want to move to Pori. You don't, you shouldn't be rude and tell that, 223 00:26:59,510 --> 00:27:07,820 it's not, doesn't going to help anybody. Then if this is a really terrific company, you shouldn't 224 00:27:07,820 --> 00:27:15,470 necessarily say that this is like the best of my options, and let's say that you have wasted your 225 00:27:15,470 --> 00:27:20,330 time in this TrueNorth program and used your one year for doing nothing, and you have three 226 00:27:20,330 --> 00:27:27,410 months left, then you should maybe tell that you have a time pressure of your own, but some people 227 00:27:27,410 --> 00:27:36,050 do this much more aggressively, and just to give it, two guys who do this in the extreme here, [unclear] 228 00:27:36,050 --> 00:27:45,260 [unclear], who's sold his bank, the Danish guys, didn't skimp on, for over, by signaling that 229 00:27:45,260 --> 00:27:53,030 he wants to sell it for over 3.5 billion, and he got 4.1 billion just by saying that this is his 230 00:27:53,030 --> 00:28:00,740 walk-away price. Elon Musk famously tweeted, well, why he was higher, or something, that this 231 00:28:00,740 --> 00:28:08,390 Tesla's worth $420, your, $1 per share, and he, 'funding secured', for his arrogance, he was, he was 232 00:28:08,390 --> 00:28:15,170 kicked out as chairman, [unclear], but you can, you're gonna make [unclear], do this even 233 00:28:15,170 --> 00:28:22,460 with the public-listed companies, which [unclear]. So if you are a really powerful guy, 234 00:28:22,460 --> 00:28:29,660 you can play outside this book, sometimes it's fails, and how to get the information actually, 235 00:28:31,080 --> 00:28:38,550 trick is not to be a smart know-it-all. This [unclear] anybody, except, like, middle-aged guys 236 00:28:38,550 --> 00:28:46,200 like me, know who this guy is, but it's Mr. Columbo, and beautiful candor, Columbo was a popular TV 237 00:28:46,200 --> 00:28:53,550 series back in, like, ages ago, and the tactic of this detective was to play a really stupid guy 238 00:28:53,550 --> 00:29:03,570 who just had a last question, who, it's completely nailed the criminal in the, in the show. So to get 239 00:29:03,570 --> 00:29:09,840 the information, it's very good to actually ask questions, then, and say that you don't actually 240 00:29:09,840 --> 00:29:15,060 understand this business, and you would appreciate any information they can give, and that's often 241 00:29:15,060 --> 00:29:25,410 actually true. Hello there, my name is Sami Miettinen, and this was the excerpt from TrueNorth Search 242 00:29:25,410 --> 00:29:35,130 ETA program, where I described, together with my hosts, Gautam Basu and Mikko Järvinen, a number 243 00:29:35,130 --> 00:29:43,260 of topics on acquisition process. I will do a follow-up podcast which will cover such things 244 00:29:43,260 --> 00:29:53,280 as team tactics, the optimal arc of negotiation, and how to close the deal. I will also answer 245 00:29:53,280 --> 00:30:00,900 a number of audience questions. If you have been listening to this, I would strongly recommend you 246 00:30:00,900 --> 00:30:11,430 will subscribe to my YouTube channel, Sami Miettinen, Neuvottelija, or search 'Negotiator'. Thank you.