News, Wall Street Journal

The Wall Street Journal: Scott Rostan “Project Funway: Code Names Spice Up the Art of the Deal”

By Gillian Tan and Liz Hoffman 

Bankers Enjoy Coining Monikers to Keep Mergers Quiet; Software Threatens the Fun

“Project Swift” sounds like the name of a military invasion or an Olympic marathoner’s training plan. But it is actually the code name for a corporate buyout, inspired by a private-equity associate’s fondness for singer Taylor Swift.

Labels like Project Token, the name Apollo Global Management LLC used to mask its purchase of children’s restaurant favorite Chuck E. Cheese, or Project Fusion, the code for Kinder Morgan Inc. ‘s consolidation of its oil-and-gas holdings into a single company, are designed to keep reporters, traders and even rival companies from sniffing out deal news before formal announcements are made.

For the young bankers who get to choose them, code names are an amusing diversion from the financial modeling and PowerPoint presentations that fill their days.

But one deal-making powerhouse is putting an end to the name game, opting instead to automate the process to avoid the pitfalls that go with the territory.

Goldman Sachs Group Inc. now requires bankers to use name-generating software that offers 10 random options like Project Calculator or Project Daniel. The new system has been phased in across the bank over the past two years, according to people familiar with it.

Though bankers can refresh the options as often as they like, some say the new naming process has taken some fun out of the game. And they say people involved in their deals often forget the random names generated by the software.

Clients don’t like the code names if they “don’t have some meaning,” said one Goldman banker.

“You often need code names for other key players,” he added. “So unless it is thematic, it doesn’t make sense.”

Banks, most of which still generate code names the old-fashioned way, have good reason to conceal live deals. Some hedge funds scour the records of newly incorporated acquisition vehicles for clues on pending deals so they can trade ahead of an official announcement.

Queso Holdings, for example, was incorporated in Delaware Jan. 10, six days before Apollo went public with its deal to buy the parent company of Chuck E. Cheese, opening a potential trading window for anyone with access to the records who knows the Spanish word for cheese. Under Armour Inc. ‘s acquisition of MapMyFitness Inc. used a corporate shell called MMF Merger Sub, which was formally incorporated two weeks before the transaction was announced last November.

Bank executives also are quite aware of the fact that unwittingly using the same code name for more than one live deal can easily lead to a mix-up, for example deal documents being sent to the wrong company. In recent years, Project Baseball has been slapped on a number of transactions, from PepsiCo Inc. ‘s acquisition of its bottling operations to the merger of NYSE Euronext, which owns the New York Stock Exchange, and Intercontinental Exchange Inc.

“Bankers could be a bit more original,” said Lewis Grimm, a partner at law firm Jones Day who advises on deals. “Every time there’s an Australian target, it’s Project Koala or Project Kangaroo.”

Blackstone Group LP’s January acquisition of a stake in shoemaker Crocs was Project Crocodile, described by a banker close to the deal as “hiding in plain sight.” When the private-equity firm bought a minority stake in Italian fashion house Versace SpA earlier this year, the deal was nicknamed Project Medusa after the mythical monster with venomous snakes for hair that is the luxury brand’s logo.

Nationality is a popular peg. Drug maker Actavis’s 2013 acquisition of the Dublin company Warner Chilcott—a deal that allowed Actavis to move its legal home to Ireland—was Project Emerald. A corporate reshuffling at Italy’s Fiat Industrial SpA, spearheaded by bankers at J.P. Morgan Chase & Co. and Lazard, became Project Farfalla, the Italian word for “butterfly.”

Other code names, like Project Swift, are more personal. In that case the deal was never consummated. L’Oréal SA ‘s recent purchase of NYX Cosmetics was named Project Bruce, after the NYX founder’s dog. Roche Holding Ltd. ‘s 2009 deal for Genentech was Project Milos, after the midtown Manhattan restaurant where Roche executives hatched the idea.

Bankers have been known to take the freedom to name deals a bit too far, choosing potentially offensive monikers. Project Cleavage, for example, was the code name for an Australian company’s split up.

Striking a balance is key, said Scott Rostan, a former Merrill Lynch M&A banker who now runs a company offering finance courses for junior bankers. Names “have to be secret enough that you can talk about it in an elevator, but easy enough to remember so that your boss doesn’t look at you and say, ‘which one is that again?’ “

Bankers also give code names to the major players in a deal. Comic-book heroes reigned when Reynolds American Inc. and Lorillard Inc. shook up the cigarette market with their $25 billion deal in July. Reynolds was Robin, Lorillard was Lantern, Imperial Tobacco Group PLC was Ironman and British American Tobacco PLC was Batman.

Last year’s tangled web of telecom takeovers became known as Project Canine at M&A advisory firm Centerview Partners. Its key players were Clearwire Corp., code-named Collie; Sprint Nextel Corp. (Shepherd), Dish Network Corp. (Dalmatian) and SoftBank Corp. (St. Bernard).

“A good code name can make you a rock star, at least for a few minutes,” Mr. Rostan said. “It’s a chance to have some fun.”