Archive for November, 2010

Deal code names

Posted on Monday, 8 November 2010. Filed under: Mergers |

One of the more interesting discussions in any deal is at the beginning when you need to decide what the confidential name should be for the project.  This is needed because at that time the deal is very hush-hush secretive with few people knowing about the potential takeover or merger.

Should the information about the deal get outside the company and its close-knit group of advisors, it could affect the pricing and even the ultimate success of the deal … maybe allowing a competitor to buy what you’re wanting to buy.  If other outsiders learn of the deal, they could trade on that inside information, making illegal profits.  And if the deal is prematurely annouced because of such a leak, the careful planning on the planned announcement date may be incomplete.

Thus it is that most companies (and their advisors) create a code name for the deal prior to public announcement.  During that period, the actual target and bidder’s names will not appear in any of the planning documents.  If one of those documents was seen by someone outside that inner circle, presumably they would not be able to determine who the target and bidder were.  (Of course, a deep analysis of any such document might reveal the identities of the two companies, as the discussion of those companies may be uniquely linked to just one possible real company for each of those with a code name.)

How to choose the names is fun.  Should it relate in some way to the company name itself?  Thus, when Bank of New York started looking to merge with Mellon Bank, they called the deal ‘Project Melody’, where the first three letters of the project name and the company name were the same.  Interestingly, some regulators today, concerned about market leaks, might think this was not enough in code to prevent inadvertent disclosure.

Or should the project name be linked to where the firm is located?  And thus Cadbury used the code name ‘Project Eagle’ for Kraft, as it was from the US as denoted by an American Eagle;  similarly, Banco Santander of Spain called it’s acquisition of Abbey National of Great Britain by the name of ‘Project Jack’, which was derived from a common term for the British flag, ‘Union Jack’; and Mellon Bank, in it’s code name for the above deal, called Bank of New York ‘Project Cider’, which was a play on words from nickname for the headquarters city of that bank, the ‘Big Apple’.

I was recently interviewed by Quentin Webb of Reuters for an article that was widely distributed on just this topic.  You can find it here in an article entitled ‘M&A deals are all in a code name’.  In it, he quotes me as saying:

Banker-turned-academic Scott Moeller said while at Deutsche Bank he worked with a list of composers Blu-Tacked to the wall; the musical giants stood in for financial technology companies that could be bid targets.

Moeller, now director of the M&A research centre at London’s City University, said codes must be memorable and should not be “too cute” or otherwise offensive to clients — making musicians a safe bet.

“Nobody can complain about being called Bach, or Beethoven, or Mozart,” he said in a telephone interview.

“My only other criterion was I had to be able to spell whatever it was — so no matter what, we’re not going to have Project Mussorgsky or Project Tchaikovsky,” he added.

I should add that the reason that we started using composer names was because we ran out of animals.  Originally in the Corporate Development department at Deutsche Bank, we had various code names for potential targets where the first letter of the animal name was the first letter of the potential target.  Thus, Project Penguin was Paine Weber, Project Dolphin was Donaldson Lufkin & Jenrette, Project Monkey was Morgan Stanley, etc.  This made it easier as we updated information about each of our competitors and potential acquisition candidates back in the mid-1990’s.  But there just aren’t as many animals as there are composers, and Deutsche Bank was making lots of acquisitions at the time.

Because they are fun and often tell a story about the start of the deal, I would love to collect some other code names, so please share them here.