That negotiation lasted about three minutes, and it was, among other things, a matter of short versus long.
I'm Sami Miettinen, the Negotiator.
Today my guest is Petri Roininen, who is the CEO of Investors House.
Before this episode I posted a short video where [unclear] I sold a [unclear] apartment using the anchoring technique.
In it, I anchored it to the price per square meter.
But let's move from this negotiation technique into the real estate world, so let's meander a bit here - maybe you, Petri, could tell us what your background is and what kinds of negotiations you've had.
Yeah, thanks. I have to say first, regarding your background video - sometimes it happens that investment banking work starts to become boring.
I think Finland's real estate sector - welcome, gladly, into it.
[unclear]
Yes. I have an engineering degree, have been in business for 30 years, of which about ten years in the finance sector, and then some twenty years in real estate and construction in many different roles, and currently I'm CEO of the publicly listed company Investors House, which is a real estate investment company, and also chairman of the board of another residential investment company, [unclear].
And actually we got to know each other through that latter one. Back then it was still called Orava, and I was at the time with Nordic Trust's bondholder representatives'
company's CEO, and then when it felt like there might be [unclear] here and the board was about to change even before that, I thought I'd [unclear] Petri, so I'd know on behalf of the bond investors
what might be going on there and whether there was any need to do anything regarding the bond.
Nothing much came of it after that, but that's probably where it started, this collaboration of ours.
Yeah, that's where it started, and then we've also worked together around these growth-company matters.
Yeah, we'll get back to that too - real estate. There's also the growth business, but Nasdaq, meaning the stock exchange, Finnvera, and especially the Finnish Entrepreneurs association launched last year a [unclear] 360-day IPO program, where 34 growth entrepreneurs were coached. By the way, how did you pitch to get those 34 entrepreneurs on board?
I found it interesting, this whole IPO coaching program - it's thinking about this kind of...
negotiation theme. Here it was important to find two things: Finland's best coaches for it, and then on the other hand
companies that are interested in growing and, at some point, would like to [unclear] list their company.
This first one was, in that sense, a pretty simple matter. The question posed was that
'I represent 115,000 companies, would you be interested in cooperating' - so in a way that opportunity is quite big, and that's why there was interest, and actually I'm really glad that everyone who was asked joined this effort. It's done somewhat in a pro bono spirit, and a really strong group there, and then 34 companies and entrepreneurs were found for it quite quickly, and
last year we then held this kind of seven-day coaching session, and I strongly believe that we'll see somewhere between five and ten of the participating companies listed within the next few years, and now of course the plan is to run a new program again this year, 2020, which is then even...
and hopefully more advanced, building forward from last year's lessons.
That was good, and hopefully TransLink at least will be one of those listing, but we'll see.
That was fun, and maybe let's move to that anchoring theme, since it was brought up at the start here,
there were some questions about it too - that you have quite a lot of followers in the real estate sector.
There were various questions about that - this price per square meter in general, it's almost the only [metric] for a private individual
and what they look at. In that video I said that the price per square meter in the Kamppi area happens to be, according to Reaktor's AI [unclear], 7,148 euros per square meter, and I explained that from there you could try to anchor upward if you don't need to sell - as I wouldn't, because I'm happy with my apartment - and I tried to demonstrate how you create added value.
But that price per square meter is quite individual, what...
and how does a professional negotiator draw out something other than the price per square meter?
That probably depends a bit on what the purpose of use is.
The price per square meter is probably what we're used to comparing them by when selling homes.
That's a perfectly valid approach.
It's been affected somewhat recently by the fact that apartments are perhaps getting smaller.
38-square-meter units, 29-square-meter units, average price per square meter, the investment world. In Finland there are a quarter of a million private residential investors.
They're of course interested in the price per square meter, but above all they're interested in the yield - what it returns, whether it yields three, five, or eight
or more percent net yield, and what the corresponding risk is.
And then of course this professional investment market, where entire buildings are involved, has a very diverse anchoring landscape.
There you have yield levels, risks, financing structures and so on, so it becomes, in a way, more complex.
Yeah, and work-wise, Investors House goes through the whole value chain. There's both real estate and ownership, then services.
The real estate value chain is formed in such a way that first there has to be land, and then it has to be zoned in urban planning, and then a building has to be designed for it, built or developed, then it can be rented out and owned, it can be traded, and then perhaps a fund can be made out of it.
and this creates a value chain from that land all the way to an investment product, and what we try to do at Investors House is
to be specifically a part of this entire chain, and we have separate companies at different points along it, and then, at best, we carry this whole chain through at the project level
and in that process the value, in a way, gets refined into it
Right, and sometimes you just take perhaps the best piece, or whatever the resources allow.
You have the campus project, and there you quite creatively broke it up into [unclear].
Yeah, so that kind of structure and ownership-financing arrangements are one element in this,
but the value chain can in principle be built from six to seven different revenue logics or ways of earning
and if you could combine them creatively, it could result in a good [unclear] and a profitable company.
Yeah, maybe if we go back to that anchoring theme once more, I made a claim there that's based on research,
that you should anchor first, anchor aggressively, use reference values, and don't round off.
and this way you get a good anchor in place - high if you're selling, and low if you're buying.
But I was asked about that - well, but since there are often buyers, sellers, and then both of their advisors
and then all sorts of price estimates, and they're all skewed, and at worst in different directions.
How does the pulling and throwing of multiple anchors go? How do you line them up? What is the truth?
That's a really interesting question. What is the truth? In real estate there's an old saying that a deal happens when the buyer and seller agree on the price but disagree on the value.
and this is hugely telling.
Then, in a way, through what kind of process and work does such a [unclear] outcome come about,
so let me take two such extremes.
On the timeline of deals I've been involved in, the shortest one - if we're talking about deals for entire buildings or portfolios - the shortest was a situation where both the buyer and the seller knew the property insanely well, equally well, and both knew the market insanely well, and also knew who the potential buyers for it were and how they think, so that conversation lasted about three minutes,
by the short or the long [unclear]? Well, by the short [unclear]. Does this work? No, not that. Okay, let's split that one in half.
The question was nevertheless about a big transaction, but both knew exactly what it was about.
Well then, the other extreme is one where
which might, during the negotiation phase, involve as many as 450 people, each of whom has their own angle.
I probably have, as the longest one, a completed nine-month process, which was a full-blown M&A process.
Then of course there are many that don't get completed and just remain a stage,
but so many perspectives come up there that first you discuss exactly that,
whether it anchors, so to speak, to the yield level or to the price per square meter, or wherever each side is seeking its own gold.
Then next come certain risk allocations, payment arrangements and so on.
Finally come the due diligences and their findings, and you try to work them one way or another.
and then when there are experts from different fields involved, from Finland and perhaps elsewhere, and some know market practices or the applicable laws of the land better and some less, then there's really a lot to discuss.
That's a really good observation, indeed.
different values, but the same price. Risto Siilasmaa - when I provoked him a bit, asking whether he felt [unclear] about it, since in a way he tricked Microsoft into buying the mobile business at an overprice and then later [unclear] it - he said that's not how it went, that we actually had the same level of information at the end of the process, we just interpreted it differently.
and that's exactly really important, and Bengt Holmström, [unclear], this whole
information-withholding philosophy entirely, saying that if the other party knows or suspects that you...
are cheating or withholding information, then they won't take part in the negotiation. Or then you have to somehow prove otherwise that there is trust here.
Then maybe one more point about that - you don't always have to tell everything, but it's good that everyone involved is told the same amount.
Then probably just this perspective, given that in the end both sides had the same information - certainly at the start the situation is that the seller has overwhelming information, and as things move forward it converges, and in a way during that convergence it's hugely important not to turn negative, which, conversely, means that those things also have to be communicated at some level early on.
[unclear]
That's actually really common, from when I myself used to do those M&A deals for a living.
There's especially, among owner-entrepreneurs, some dark secret.
And then they always have some shareholder-agreement complication, or some deal on hold, or something like that.
So then I always joke that you always have some skeleton in the closet.
Just tell it, so everyone gets time to deal with it.
the advisor gets to keep this hidden, it doesn't get resolved, and the process can die if this skeleton is brought out at the last minute, when it could have been brought out in a fully controlled and managed way during the process.
That's probably exactly right - that those things too, exactly in this controlled way, need to be out in the open, and even so, in a way, those dealbreakers don't show up later on, and there's wisdom in that.
Yeah, maybe then about that time dimension. In your negotiation [unclear] book you indeed said that the Excel models started to work when there was a long time span and the payment terms were a bit different, and in a way financing came into play there too.
These kinds of synergies and different time preferences are hugely important, and then from that I picked up on the fact that apparently foreign real estate investors have now arrived, and they have, in a way, an entirely different reference point of their own.
looking somewhere at the yields of Europe's major cities, which have been pushed down, and
then in Finland you might find better yields, but you're in the same euros.
Maybe some reflection on those - time, financing, and foreign investors versus [unclear] domestic ones?
Yeah, there are probably a few perspectives there - if you don't lock in that time window,
then, according to the old saying, time is money.
[unclear]
the payment timings were shifted by two years, but the rental income transferred immediately, so that, in a way, solved this question, which means that this time dimension is a truly central negotiation dimension.
And then again on this international perspective and the Finnish real estate market - the Finnish real estate market actually started integrating with the international market in 2002, with the Itäkeskus [unclear].
The phenomenon is this recent, though. Back then it happened first on the commercial real estate side, and now, in the last decade, during the 2010s, it came to the residential side.
Then the benchmark changes quite fundamentally. Then you don't think about whether Tampere and Turku have the same price per square meter, but instead you might think about a question like whether Kuopio's return-risk ratio
is better or worse than the return-risk ratio of Germany's thirtieth-largest city.
Because that's how it is from the buyer's perspective. And again, of course, we ourselves should understand where this integration is heading and what it affects.
Maybe then one anchoring point that irritates me, since I am something of a patriot after all,
is that when the real estate [unclear] comes up enough for us, someone buys it at NAV, [unclear] asset [unclear] away,
so here we've had Sponda and Technopolis, and now even care-home real estate is finally going that way too.
And in a way, what seems to be there is this net asset value of its own.
that somehow they tend to trade below it, at a discount to it
and then they get picked up at [unclear] valuation, but then again we get back to those valuations - whether their value is then the absolute truth
But how do you see this, on the other hand - this net asset value gap, or the plundering raid of international firms then in Finland?
In Finland - whether there are, like, some dimensions to it that you yourself see.
Well then, 'plundering raid' is a strong word - in practice it's, like, there too.
It's market economy, of course.
Bringing capital to Finland and the real estate still being preserved - that hasn't been such a bad thing.
No, no, no.
But, and then, sort of, sort of, this kind of appraiser tries to determine the value of those properties at any given moment,
[unclear]
for instance if it referred to the world of listed real estate companies, then it's probably been the case that, typically, the Finnish real estate sector has traded below its NAV - net asset value - yeah, Stockholm has perhaps been closer to that net asset value, and then there are these individual deals, of which you mentioned the care-home case last, where the share value clearly exceeded that NAV - so it can be affected by so many [unclear]
factors then - future outlook, again the company's earnings capacity, and so on.
And then one such thing can also be this Finnish taxation, which in a listed real estate company first, in a way, applies corporate tax and then dividend tax for the shareholders.
and that may create a fairly significant wedge compared to an unlisted one.
That may be one reason why the number of listed companies has decreased recently in the real estate sector for us.
Does some real estate sector [unclear] leave anyway?
know-how, since public-company governance leaves from there anyway - or is it actually quite thin?
Yes, I think the headquarters and its location definitely matter. It guides where that capital gets allocated [unclear].
Although as a general rule I see it as really positive that the Finnish real estate market has become international, it has brought liquidity to the market,
capital, opportunity, and various strategies, so that the market isn't homogeneous but also withstands cycles better.
Of course it's a bit [unclear] then, because in terms of investing I think the stock exchange is unbeatable.
We don't have that many real estate companies there anymore, I think there might be four on the main list.
Yes, yes. Maybe about that time dimension, and then about why some...
...values are of better quality than others - aren't those long-term customer contracts hugely valuable?
If you have, say, 15-year care-facility contracts with reliable parties, where there's ongoing use,
they are more valuable than, to put it bluntly, a very specific industrial-town property.
and then in between are those buildings filled with people, where they can either work or live.
Maybe actually a quick question about that - they're being mixed now, right, living and working - or at least there's a wish that they could be combined.
Yeah, probably so. That's of course how it is.
value is formed, in the end, from cash-flow projections, and the longer the contracts are, the easier they are to forecast.
Then this, what it refers to - hybrid buildings - I think they've been built for a long time in various major cities, and they've generated income, and they've been part of the development of city districts and urban development.
For us they've now started making their entrance, with the Kamppi Center perhaps being among the first where retail space, offices, and housing came together in a single complex.
Now when you look at the development of Pasila, you're witnessing this same phenomenon [unclear] - the emergence of hybrids is living urban development.
Then there's also probably a phenomenon where, when you build tall buildings, and if hundreds of apartments come into it, the pre-bookings for them can, in a way, be [unclear].
In a country the size of Finland it's difficult to get, say, three to four hundred apartments [unclear], so there's also a pragmatic starting point that hybrids come in there with apartments around them.
Right, and it's no longer the street-level shops that get the sales - isn't street-level retail a bit dying out, with shopping centers grabbing that space?
It's a bit of a shame - actually, close to where I live, it's actually quite good that there isn't a shopping center there.
Yeah, it's of course a bit of a shame, since those street-level shops create, like, small-scale entrepreneurship, and they create, like, vibrancy
but we wouldn't quite, like, declare it entirely dead, because we also have, like, phenomena where some operators have, like, been trying to get, for example, grocery retail closer to people
bringing back the corner shop and the neighborhood store, and the needle can, so to speak, swing a bit either way.
How about then B2B negotiation, B2C negotiation - meaning Business to Business and Business to Customer,
but then B2G, meaning the zoning authority - is the zoning authority a bit more reasonable now?
Have they, in a way, become wiser on their own, or are there still flying squirrels and parking-space minimums and other such hassle to be found?
The traditional setup is that there's the money-hungry builder, and the zoning authority that looks at broader urban development.
and both have their own justified points of view.
Within the RAKLI industry association I've done a lot of work around this topic and tried to gather this together, and I was chairman of a community-infrastructure steering group for about four years,
and during that time we produced discussion papers together with a large group that includes zoning authorities, investors, and builders, and tried to find, for example, questions like,
the cost impacts of zoning requirements, quantitative material, and ways of how they can be handled.
if you want to build a lot of parking spaces into a building and be able to price them, how much do they affect the rent?
Or if you want large clubrooms or intricate facades, what effect do they have on your price or rent?
Is it customer-driven, resident-driven - does anyone actually want to pay for those - trying to find this kind of discussion where both the building's features and the costs are on the table together?
What about when urbanization proceeds really unequally - there's 'congestion Finland' and the metropolitan areas that Finland has, and then there's, in a way, a dying and aging Finland,
has the zoning authority's behavior changed there, in a way, in that 'falling knife' area, where the price per square meter might drop and stay down?
um, apartments standing empty, and they get demolished.
I mean, like, the challenge is completely, like, the opposite.
Okay.
If we're, like, in the capital region, or, um, then last autumn there was an opportunity
to go meet, like, the municipal directors of six municipalities in one somewhat declining area, so
those challenges are as totally different as they can be, and there's no single same solution for them, but for them
you should really go looking for a solution from that place's own characteristics, but then if we're in a locality where, if I put it a bit bluntly, there are more summer cottages than people, and summer cottages aren't quite as mainstream anymore as they used to be, then the equation isn't easy - in the long run it can't be based on anything other than that some kind of [unclear] needs to emerge there for it,
entrepreneurship. Nothing else lifts that area. Efforts there should be aimed at those things.
This is then in places like Helsinki and
the capital region, which has grown faster and where the number of single-person households has grown faster than ever believed.
Here, the focus should instead be on getting zoned plot land out as quickly as possible, so that housing supply can get out.
Those challenges are very different.
Public authority is also behind everything, partly. There are certain kinds of liabilities that can be triggered, and then there's housing benefit and so on, and, in a way, this state liability tied to the real estate stock.
Some have even half-seriously floated the idea that the state should step in, so there'd be a price floor for apartments, which right now is pure [unclear].
But isn't there still, after all, this kind of potential bomb that could go off?
Yeah, if we go into this role of the state, this is somehow such a quintessentially Finnish way - that when there's some problem somewhere, the solution is that
someone plugs it up.
It's like, if you carry it all the way through, it's an endless [unclear].
Nothing can withstand that.
And now, Finnish rental apartments.
We have 800,000 rental apartments.
Half of them are apartments built with state interest-subsidized loans, which are mainly owned by, that is, municipally owned companies.
That creates a peculiar situation - if we start again from the plot, the municipality, meaning us as taxpayers, hand over a plot at half price to someone, so that's the first subsidy
Then when construction starts, the state throws in a start-up grant, that's the second subsidy
Then it's financed almost entirely with a state-guaranteed loan, that's the third subsidy
Then when tenants eventually move in, municipal housing benefit or the equivalent comes into that role, that's the fourth subsidy
Then when it needs to be renovated, a renovation grant comes in, that's the fifth subsidy
and, in a way, this
This leads to there being a massively large body of housing where the risk of ownership and enterprise has actually shifted to municipalities and the state.
And I think that if you add up all these subsidies and then look at putting them on top of the cost of that subsidized housing, it might turn out to be the most expensive housing of all.
The City of Helsinki should, for example, immediately sell half of the apartments it owns onto the market and use that money for something completely different instead.
The City of Helsinki is, after the state, Finland's biggest residential investor.
Yeah, as long as it's not at least put toward [unclear] expenses.
Well, into something - say half into [unclear] expenses and half into something else.
That too, in a way - whether you're on a city leasehold plot versus your own plot - there's become quite a big game around that in Helsinki, wanting to monetize that leasehold plot a bit. That probably changes these Excel models quite a lot.
I think it's entirely right that the city tries to get fair compensation when it transfers its property.
That is, market-based compensation.
It would be good in the sense that it would apply across the board.
No one should be favored.
No one should be favored this way, whether in the transfer of plots or in selling zoning-designated commercial premises to someone.
There are a lot of these hidden elements in it.
Yeah. Then a bit more about that time value.
I was - not the most glorious period in my career, but I was at Royal Bank of Scotland for a time.
It owned a [unclear], probably still owns it, which Nordea used to own at one time.
There I sometimes looked at the structures that were offered, in a way, as financing for some headquarters-type properties.
[unclear]
The DNA headquarters, for example, was financed with something like that.
What stuck with me was that first there was this kind of triple-net structure, where, in a way, there was
the tenant in the property arranged all its services itself.
But then what I found really interesting there was the residual value, because there were two philosophies to it.
One is, in a way, that you just do - whether it's now a [unclear] or you sell
the property to that bank or financier, and then there's that
[unclear]
view among different players regarding that end value, and with that some take that too.
A pessimistic view of who could come into it after that.
Yeah, that's, in a way, exactly about that cash flow and the arrangement of that risk, in that in traditional leasing, if I'm the landlord and you're the tenant, you pay me rent, but I handle everything related to it.
The upkeep costs - if something needs fixing, I handle it, and then I also carry the risk that if you one day leave, then what do I do with that building.
Finland's growth company, property development, tenant, property development, tenant, investor
Then it's fairly cheap that it still works, but...
Then it's more a question of whether I can get cheaper financing in this case than [unclear].
But when you've watched those - some headquarters is supposedly sold and later it gets pulled off again at an even bigger price to renew it - so somehow that residual value too can be a good play for those tenants.
Residual value is hugely important in hard-nosed calculations, because even by the old rule of thumb, even if you take ten years of cash flows, there's still about half of the total value left as residual value. How that's handled is [unclear].
Yeah, that's generally, in a way, a negotiation technique too - that you have, in a way, a service period, say you lease some device, three years for a laptop say, and then a lot of people don't actually return that laptop to the seller but continue with that service agreement, and that's maybe already factored in, that the provider is calculating it as fully amortized, so again if you flip the game around, that time value is hugely important there and
Maybe then, quickly going back to the private individual's side - what kinds of tricks, in a way, can now be used to get that apartment's price or value up - are there any general rules of mine just for that, so that if someone watching this is now thinking about selling their apartment, or an apartment purchase, what holds its value, would there be some wisdom on that?
I'll actually dodge this question by recommending you watch Sami's Helsinki apartment presentation video, in which he anchored to certain price levels and created certain added value and smoothed the deal-making with various process promises.
Yeah, I'll put a link to that video so you can go watch it.
That was really like the talk of a professional.
Yeah, thanks. Then maybe, moving to those negotiation challenges for growth entrepreneurs.
briefly, the stock market wants companies that grow and then become profitable, or at least turn into that, and then in this growth-entrepreneur program many had this kind of problem, at least it seemed to be, that you have to sell - this ownership, at least partly, first - in order to put it on the exchange, so fairly similar challenges for pretty much everyone, but if we just jumped straight into this IPO listing,
and their listing was done quite innovatively, wasn't it - tell us first how Investors House became a listed company.
Investors House has two roots. One is the Investors House founded in 2009, which started developing residential apartment buildings and offering them to investors.
The other root is SSK, Suomen Säästäjien Kiinteistöt, which was listed in 1898.
it turned a full 30 years, and in 2004-2001 a group of the three of us acquired a majority in this SSK,
we started developing its operations, expanding it, and as one part then merged this with the Investors House I had founded
operations, in 2015, into this SSK, and in that connection its name was also changed to Investors House.
Since the start of 2015 we've now grown very strongly and taken
this combined entity forward in such a way that its results - and again it has grown a great deal.
And then now we have this whole value spectrum, so this is our stock-market story.
On the other hand, we have thirty
years of stock-market history, but then through this merger five years ago, we started a kind of new phase.
Is that, by the way, a wordplay - 'House Investors' backwards - or where did it come from?
Well, the name Investors House originally came about in the summer of 2009 - we were thinking about this business idea, which we had tested a couple of times before,
but hadn't made it to market, and then it looked like now we'd get there, so we wanted to go with it.
to a club and group related to investing.
Then we found this kind of formation and shortened it further to IWH.
We tried to think what would be close to IFK, but we didn't get there.
So we got IWH, and we made a spelling mistake on purpose.
Tappara, by the way, is actually the right answer - aren't you also from Tampere?
I've lived in Tampere for five-ish years, and I don't know - this question always comes up, which one, and you have to answer it.
about the use of advisors. There I nearly became an unpopular advisor in the IPO program, because I preached there about keeping cost discipline and keeping advisory costs in check.
Do you use advisors when buying or selling?
Yeah, so we've tried to think about it in such a way that we ourselves should be able to do those somewhat routine-like things.
and you have to do them once so you learn them. And then again we try to use advisors in situations where value can be created, since good advisors are always worth their fee.
and that's how we've tried to think about it. Somehow, from this topic of the stock exchange and growth companies and around the program, this connects a bit to the anchoring theme too, where it's also discussed - going public is very often linked
to access to capital, and that's of course hugely important, that the stock market is a channel through which you can raise equity and then again take on debt and grow.
But in a way, I think during this program - and otherwise too - it crystallized that, for the entrepreneur who's considering going public, that capital is also available elsewhere.
[unclear]
among other observations, there's often, in a way, a kind of prison-like shareholder agreement and the original founding team, because they can't, in a way, get away from each other even if they'd want to, and then you have to work together, and some of them don't really fit into that, and it turns into drama.
It's worked at some point, people's lives have changed, the world has changed - the stock market has this good side, and then it also has, in a way, certain other dimensions,
it often opens up many other financing channels as well, and then further, a listed company is, from the perspective of stakeholders - customers, suppliers, and partners -
it's transparent, credible, reliable, it also produces a lot of that kind of added value
Some of it - family businesses
[unclear]
companies that have, in some way, succeeded in combining a strong anchor-investor role with being a listed company - among listed companies they've done quite well by pretty much every metric.
Maybe such a combination is possible in some form.
Yeah, wasn't your first book something about entrepreneurial ownership?
Yeah, it dealt specifically with that.
Siilasmaa [unclear] there, saying that ownership...
is, in a way, a philosophy where it could be pretty much any employee - even if they don't own a single Nokia share,
they might still take ownership of the matter, and that culture of ownership drives things a great deal.
When he had founded F-Secure, there he was an extreme owner, with tight control,
and then all the incentives there were set cleverly, even down to leaky roofs there.
that kind of feeling of ownership and that feeling of being involved, and the fact that, if the whole group shares it, personnel funds might fit quite well into that.
and now at Investors House, something like that was introduced about two years ago, in the second year that is,
a personnel fund, and now there are the first experiences with it, and yes, it does increase that interest toward the employer,
but then, on the other hand, it also distributes that profit to everyone, so in that sense it also, to some extent, aligns the shareholder's
and employees'/staff's interests. Not a bad thing at all these days.
That reminds me. My master's thesis topic, back then, was the use of options as a compensation method, [unclear], where, by the way, I studied under Holmström for the first time - agency-principal theories were being developed there, where you get this interest aligned in the same direction, and that can often break down in too large a company - these incentives - and people, in a way, start building their own internal power positions instead of moving in the same direction.
that kind of thing keeps getting more complex all the time
Yeah, maybe those negotiation levels in a listed company - there are governance structures, there are owners, shareholders, and maybe then some big anchor owners, and then there's the board, which is, so to speak, their workhorse, and in particular
the board's chairman, the CEO, the management team, and all the employees there in the company.
When negotiating there, of course on the public market you have to negotiate according to insider-trading rules,
so that discussions are held only on the basis of public information.
This negotiation - when you said there aren't really that many listed companies, so in a way you're probably negotiating more from a public company outward, not toward a public company, so that's maybe a bit easier, but of course when you have to share that value position in order to get long-term contracts, how do you, in a way, handle that public company's obligation to use only public information versus then unlisted companies,
at least there's a small risk that it could betray trust beforehand.
Yeah, so, like, it's very precisely defined there
and, sort of, this, like, the material-event moment is this kind of
like, the definition of when inside information arises
and, a few years back from now, it, in a way, moved noticeably earlier
and there are, like, very precise definitions of how it's done
Then you set up various project registers and confidentiality agreements and things like that, which form the basis so that you can proceed after a certain point, and then if, like,
If the matter reaches completion, then it's disclosed and it dissolves. If it doesn't reach completion, then it's dismantled.
It's hugely important that it's a process that happens in a coordinated way.
Fundamentally, all those levels need to move in the same direction - I thought there was a fun example,
that Juho Lipsanen said - he had heard it from [unclear], this kind of Swedish ABB CEO,
that when he was working there, he had learned this kind of charm-offensive strategy.
He said that at its best there were 12 levels coordinated, and communication,
that they would go, say, to charm some customer with everything from the driver up to that [unclear].
all the way up, twelve levels sent the same message to that negotiating partner, that
That's, in a way, maybe here finally about that negotiation-team dynamic, that
maybe the greatest wisdom - maybe that anchoring is the most important thing, but
then this team matter - many waste a huge amount of potential because they don't coordinate at all
or assign any kind of roles to that team, so that
a quick recommendation on that, by the way, I think, is that if you have, say, a three-person team, then the lively value-creating negotiator, who looks for those time-dimension packages, maybe splitting deals and customer opportunities, is the lead negotiator and creates that kind of creative value; then you have a certain kind of quiet decision-maker, who's usually the one whose position is set at least the highest, so that from there, say
too much of a hand, maybe, into the flow of that negotiation, and then there's a really important role like an observer-recorder.
A scribe who observes the other side's reactions to your packages and takes notes.
But you often notice that people go in loose/unprepared and nobody really coordinates anything.
Have you thought about this team dynamic yourself when you go into a negotiation?
Well yeah, I mean I easily recognize that kind of...
...situation where you go into negotiations too lightly. Whether they're bigger or smaller.
I've tried to think about it this way, whether it's a bigger or smaller negotiation you're going into.
At the very least, what you should do is figure out what happens after that meeting.
and then above all, perhaps, what the alternative outcomes of that negotiation are
whether you go in that direction, or that direction, or that direction, if that's even seen in advance
but I think that very often in Finnish culture people go into meetings sort of to see what happens there
this might sound a bit dumb, but I think it's more common than we believe
because those who conduct negotiations are often quite busy, and so on.
preparation can be a bit weaker, and in the end probably fairly little thought is given to very elaborate role assignments beyond what comes about somewhat naturally.
That's a hugely important point, that reminds me that with [unclear] we've developed this negotiation plan, or negotiation dialogue.
In a way, that preparation before the negotiation. Just simply that you put an agenda in the email - that these three things will be discussed - and you calibrate a bit how the positions are before [unclear], so we don't go in completely cold.
Simple things are important things.
You can't precisely plan any creative process, but you should, like, sort of map out the inputs and outputs a bit, so that...
Yeah, good point. I think we've managed to map out pretty well both real estate world negotiations here, and this is a bit of a [unclear] podcast, since I'm just starting out here now.
and now the jingle should have kicked in, so music should be coming here, and thanks for all this feedback.
Then I'd hope you'd give tips on good negotiators - since real estate and housing are Finns' biggest source of wealth,
then one will be shares, which are unfortunately a small share of our wealth,
but on that front Martin Paasi from Rahapodi will [unclear] be coming.
I'd hope for tips from you too on this. I don't know - does a good person from your field come to mind who could be interviewed?
[unclear] might be pretty fun, maybe.
[unclear] is really skilled. I'm wondering if maybe from there...
Or then maybe some zoning guru from the public sector could work too.
That could work too. If I take a bit of time and think about it, I'll get back to this.
Yeah, but thanks for this, and I think this will generate questions.
So hey, put your questions in that feed and subscribe, and this is an interactive thing, and also whether this works - meaning this five-minute anchoring example and then, like, an expert interview - I'd like to hear whether you think that's a good idea for a format.
But indeed, this has been the Negotiator channel, and I'm Sami Miettinen, and we'll continue with negotiations later. Thanks.
Thanks.