M&A code names can be a warning in themselves

LONDON (Reuters Breakingviews) - The code names bankers and companies attach to their mergers and acquisitions can reveal much about their own hubris. Last year, according to a study by data company IntraLinks, the most popular secret deal names included Project Diamond and Project Falcon – even though most mergers fall short of their potential. Breakingviews has taken some actual code names from the past year, and applied them to deals that seem particularly fitting.

Participants dressed as Jedi Knight characters from the Star Wars movies, perform with their lightsaber props during the opening day of "Star Wars Celebration Japan" at the Makuhari Messe in Chiba, east of Tokyo July 19, 2008. REUTERS/Issei Kato

LSE-Deutsche Boerse: Project Rocky

Sylvester Stallone’s movie tells the story of a down-on-his-luck slugger who takes on insurmountable odds but still, ultimately, loses. In a similar vein, the punch-drunk bosses of the UK and German stock exchanges battled on for a year with their $30 billion merger despite failing to convince their shareholders of the merits, and Britain voting to leave Europe part way through. Rocky Balboa eventually gets beaten by rival Apollo Creed. European antitrust chief Margrethe Vestager plays that role off screen, mercifully sucker-punching the deal last month.

Pfizer-Allergan: Project Phoenix

Like the mythical bird, the two pharmaceuticals giants’ $160 billion merger was destined for spectacular self-immolation. It had nothing to recommend it other than massive tax advantages from basing the combined company in Allergan’s Ireland headquarters. Politically, that proved a little too hot to handle – the U.S. Treasury killed off the so-called inversion trade last April. There’s a degree of regeneration for the U.S. Viagra maker, at least: its shares have narrowly outperformed the sector since the deal incinerated.

Kraft-Unilever: Project Jedi

When a group of nimble underdogs takes on the bloat of a giant empire, “Star Wars” is the obvious comparison. But which side is which? Snack maker Kraft Heinz saw an opportunity in February to apply a cost-cutting lightsaber to the Anglo-Dutch regime’s sub-par operating margin. Unilever, though, used the Force to deflect a bid that would curtail long-term investment and require heavy job losses. Unilever has now embarked on its own Jedi quest to unlearn what it had learned, starting with a possible sale of its spread-making business.

Bayer-Monsanto: Project Gandalf

The venerable “Lord of the Rings” wizard comes a cropper in the first book of J. R. R. Tolkien’s epic when he plummets into a dark pit while taking on a large and ugly monster. Shares in Germany’s Bayer fell almost as precipitously last year after it overpaid for Monsanto in a $66 billion deal that necessitated a similarly monstrous helping of debt. It didn’t help that the $17 billion premium easily outstripped the $12 billion present value of cost cuts. Gandalf, of course, came back restored and more powerful later in the trilogy. Bayer should be so lucky.

HNA-everything: Project Goldfinger

In the James Bond film, a mysterious outsider with an eye for trinkets sets his sinister sights on limitless wealth. Chinese travel group HNA is similarly entranced by all that it thinks glitters, spending tens of billions of dollars on a mish-mash of assets ranging from a stake in Deutsche Bank to U.S. computer wholesaler Ingram. In reality there’s nothing obviously sinister about HNA beyond the fact that it was barely known until recently, but its grand plan is no less puzzling. Goldfinger’s fate was to be sucked out of an aeroplane window; the Chinese group may just end up jettisoning value.


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