Mika 

LEHTIMÄKI

Mika was a full-time research associate at the Centre for Banking and Finance Law. Prior to joining the Centre, Mika completed his Masters degree at the University of Helsinki, and his M.Jur (Distinction) as well as his M.St at the University of Oxford. He completed his DPhil in Oxford in 2020.

Mika has extensive experience, on partner level, of legal practice in M&A, corporate and financial transactions law and he has worked for a number of years in European, cross-border and domestic arrangements. He has been ranked throughout 2011-2019 as a leading Banking and Finance lawyer as well as M&A lawyer by Chambers Global and Europe, IFLR1000 and Legal 500. He has advised private equity and hedge funds, financial institutions and corporates in numerous financial and corporate transactions and is able to draft and analyse most types of cross-border arrangements. Mika employs also statistical analysis, game theory and coding (Python and R) on analysing financial and corporate transactions.

He is also engaged in the work of combining financial law and regulation with game theory and computer science. Mika has been an associate editor of the Oxford Business Law Blog. He has also earlier acted as the Co-governor of the Oxford Financial Law discussion Group.

Read his op-ed, “Three Rules for Predicting the Future” in Linkedin here.

Presentations

• “Playing the ‘Restructuring Game’ in Advance by Contract”, NCMF Virtual Seminar: Restructurings in the Nordic Markets, 20 November 2020
• “Multi-Level Agency Costs in Private Equity“, CBFL Working Paper Presentation (Zoom), 10 December 2020
• “Leveraged Transactions and Intercreditor Agreements“, CBFL Seminar Series (Zoom), 7 January 2021

Selected Publications

• MJ Lehtimäki, The Investment Game in Private EquityLeiden, The Netherlands: Brill (2022) doi: https://doi.org/10.1163/9789004517844.  Available at https://brill.com/view/title/62229?language=en
• MJ Lehtimäki, “The Investment Game in Private Equity” (2021), CBFL Working Paper Series, CBFL-WPS-2103
• MJ Lehtimäki, ‘The Structured Products Law Review – Finland’ in (ed) Christopher S Schell, Yan Zhang and Derek Walters, The Law Reviews 2019 (Davis Polk & Wardwell LLP)
• MJ Lehtimäki, ‘Finland – Alternative Investment Funds 2019’ in (ed), Alternative Investment Funds 2019 (Global Legal Group 2019)
• MJ Lehtimäki, ‘Finland – Alternative Investment Funds 2018’ in (ed), Alternative Investment Funds 2018 (Global Legal Group 2018)
• MJ Lehtimäki and Juha-Pekka Mutanen, ‘Finland: Favorable for private workouts’ (2010) IFLR International Financial Law Review
• MJ Lehtimäki and Juha-Pekka Mutanen, ‘Corporate Recovery and Insolvency 2009 – Finland’ in Sarah Paterson, Slaughter and Ma (eds), The International Comparative Legal Guide to Corporate Recovery and Insolvency 2009 (Global Legal Group Ltd. 2009)

• Banking and finance law
• Private equity and debt funds
• Game theory
• Coding and quantitative research

Research Project

Multi-Level Agency Costs in Private Equity

Private equity investing and the leveraged buy-outs are plagued with the risk of agency costs, so the markets have developed several mechanisms to align the incentives of the funds and the investors. However, the limited partnership agreements do not in practice deal effectively with the most important agency costs, the investment periods are long and fund disclosure may not be supported by sufficient remedies.

There are two additional relationships that affect the incentives and dynamics of private equity funds. The first is the need for interest alignment between the fund (and the GP) and the managers of the portfolio companies. The second is the risk of financial agency costs and strategic creditor actions between the fund and portfolio companies and the creditors of an LBO arrangement. Also these relationships are primarily governed by contracts.

When these three relationships are evaluated together, we can see that the private equity funds tend to opt for a ‘risk-allocation space’ that optimises their risk-return, while controlling for both the investor-run-out scenario, negative cash-flow decisions by the managers and strategic creditor actions and control in a default scenario. The research builds on a formal mathematical analysis of dynamic games of incomplete and imperfect information in these three relationships. Based on the formal framework, the research evaluates fund regulation in the UK, Luxembourg and Singapore and how they deal with this comprehensive view on private equity. The research aims to provide formal and practical solutions to the agency conflicts surrounding private equity contracting. The research also addresses the question whether national regulation-based regimes should be enhanced. The objective is to give national regulators and actors tools to make regulatory regimes and contractual frameworks more competitive and sound while dealing with the systemic and transparency risks inherent in the ‘risk allocation space’.