Animals, chemicals, and astronomical phenomena have disguised some of 2010’s takeovers, and dealmakers may have to come up with more aliases to keep their plans secret as mergers and acquisitions accelerate.
Speaking in code is nothing new in a world of “bear hugs,” “poison pills,” and “white knights” but the colourful terms are an important guard against leaks that could torpedo a deal or facilitate insider trading.
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.
It could be time to get creative with names again.
UBS predicts improving corporate confidence, cheap debt, and hoarded cash will help spur a global M&A wave, after the first three quarters of the year saw a 5 percent rise in the number of deals, and a 28 percent rise in their value to $1.76 trillion, compared with 2009.
People familiar with M&As — who declined to be identified, for obvious reasons — provided several examples of codes that camouflaged recent deals.
Kraft Foods Inc.’s plan to swallow Cadbury was “Project Helix,” with the British chocolatier “Chromium,” a chemical element whose name comes from the Greek word for colour.
Kraft was “Krypton,” after another element whose name derives, appropriately enough, from the Greek for secret.
Still, equating the biggest U.S. food company with a gas that’s odourless, colourless and tasteless is perhaps ammunition for those who deplore cheese slices and other processed foods.
GALAXY AND ECLIPSE
Two other big deals looked skywards for inspiration. Emerson Electric Co’s $1.5 billion purchase of British power firm Chloride was “Project Galaxy,” with the bidder “Earth” and the target “Mercury,” the closest planet to the Sun.
Perhaps more ominously, Electricite de France (EDF) SA’s
sale of its British electricity networks, which power 8 million homes, was “Eclipse.” That didn’t deter Hong Kong billionaire Li Ka-Shing from a $9 billion purchase.
It’s been like this for decades.
“Barbarians at the Gate,” the banker’s Bible that chronicles the 1988 takeover battle over tobacco and biscuits conglomerate RJR Nabisco, shows buyer Kohlberg Kravis Roberts dubbed RJR “Project Peach.”
Rival plans were floated under monikers such as Reo, Smokescreen, Stretch, Tara and Sidam, or Midas backwards.
The names need to resonate with the bankers and lawyers who use them, and often juggle multiple projects, but also must avoid references or alliterative titles that are too obvious.
Keen to leaks during the last merger boom, Britain’s Financial Services Authority (FSA) in 2007 criticised “poorly chosen” terms, and felt compelled to remind firms to make codes “sufficiently different” from real life.
ROLLING STONES
The terms can emerge in several ways, such as accidentally, if documents are poorly edited as a deal goes live; in court cases; and in some filings with the U.S. Securities and Exchange Commission (SEC), such as letters where banks pledge to fund a deal.
In SEC filings, website operator Internet Brands is “Project Micro,” and Protection One becomes “Jayhawk,” a mythical bird synonymous with Kansas, where the fire-alarm firm is based. Other codes include “Blue” (Burger King), “Flashback” (Airgas), and “Giraffe” (Gymboree).
Citing court documents, The Globe and Mail, a national newspaper in Canada, says BHP Billiton dubbed its takeover strategy for Potash Corp “Project Porcupine.”
But a whimsical name can come back to haunt, as Terra Firma , the British investor suing Citigroup over the ill-fated takeover of EMI in 2007, has found.
Witnesses for Terra Firma have had to deny in court that their code name, “Project Dice,” pointed to a risky deal. Instead, one testified, it referred to “Tumbling Dice” by the Rolling Stones.
For Moeller, the London academic, the codes just add to the buzz of working on confidential projects.
“One of the attractions of being in M&A is you are working on something that is very secret, you’re one of the few people in the world to know about it, and it will make front page news when it does come to light,” he said.
