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Code name : from camouflage to camouflet

The financial industry has a tradition of using a code name (or "project code”) to designate a contemplated transaction and to give the key stakeholders aliases.

Blend into the landscape like a chameleon

It may seem surprising to see the business world imitate military codes in this way. What would the planning of the Battle of Normandy during World War II - dubbed Operation Overlord - have to do with a simple business acquisition project?

In both cases, the choice of a code name makes it possible to move forward in quiet steps and thus to preserve the confidentiality of the contemplated transaction. The need for confidentiality is shared by both the business world and the military operations.

Moreover, if the parties had not spontaneously thought of this, the French Financial Markets (“FFM”), urges them[1] to promptly take appropriate measures to protect privileged information and limit the number of people having access to it, which includes the "systematic use of code names for transactions".

It should be noted that equity transactions require the mobilisation of significant resources and, regulator the protagonists set themselves objectives to be achieved within a limited time period. In addition to protecting secrecy, the choice of a code name makes it possible to unite a team around a project that brings together a variety of skill professional (legal and accounting , strategy , investment bankers, etc.) around a common objective.

The borrowing of the code name practice from the military is therefore not illegitimate. It should be noted that the science of business organisation has long been nourished by the way armies operate (strategy, human resources management, logistics, etc.).

One may ask himself whether the choice of the code name is free or, on the contrary, whether it needs to meet certain criteria.

Freedom seems to be the key word here. This is revealed by the following list: “Mercury”, "Digital", "Zion", "Aqua", "Magellan", "Tolbiac", "King", "Sphinx", "Perfume", "Abbey", "Newton", "Blackjack", "Bingo", "Sabre"... which are all code names that have been revealed after the case has given rise to a judicial or media development[2].

As there are no legal criteria for choosing a code name[3], we will simply point out a few pitfalls to avoid.

To ensure the confidentiality of the underlying project, it seems essential to us that the code names are not too close to the lexical range describing the activity of the target company or to the name of the latter. By way of illustration, and even though it may seem obvious, calling the equity transaction that could be targeting the Danone group “the Yoghurt project”, would be perfectly inadequate.

One may add that the chosen code name should not carry with it any connotation that could cause harm to the project. In this respect, the aforementioned "Blackjack" or "Bingo" operations are examples of what not to do. Confusing a merger and acquisition transaction with a game of casino may, quite rightly, be badly perceived by the stakeholders and in particular the employees of the target company.

However, there is no shortage of references for giving a code name to a proposed equity transaction and thus avoiding the camouflage turning into a snub.

One can draw inspiration from mythology, literature or even music. And, if you fall short of code name, there is an alias generator on the Internet[4] that can come in very handy.

[1] AMF Recommendation 2010-07 "Guide to preventing insider misconduct by executives of listed companies".

[2] Although it is not systematic, it should be noted that the prosecution of "insider trading" is the offence that most often gives rise to the judicialization of the underlying equity transaction and therefore to media coverage.

[3] The only legal obstacle one could think of is the protection of trademarks and intellectual works by copyright. The practical interest of this subject seems limited to us, since the purpose of a code name in terms of capital transactions is precisely to remain confidential, which is opposed to any form of publicity. The question would have arisen differently in the case of a code name aimed at protecting the launch of a new product, which can sometimes find media coverage, sometimes encouraged by the brand itself.



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