Harry Bingham - The Money Makers

‘The third thing is this. My good friend, Bob Landau, who runs the trading floor at Coburg’s, tells me that your brother is expected to do well in the corporate finance department there. They’ve never heard of you, and it’s pretty clear that you don’t know much about them. There are rules which matter a lot in banks and they matter most of all on the trading floor. At some point most traders break them. They don’t record a trade when they should do. They exceed a position limit. They tell a lie or conceal the truth from a client. I regret that this game is what it is. But I know that paying young men what we pay them and motivating them as we motivate them will encourage mistakes. What I tell traders in this firm is this: you can make one mistake and usually we will forgive it. But if you make two, it suggests you’re not capable of learning from your errors and we don’t want you here. You, Matthew, have used up your mistake.’

Home late after a party. The music had been excellent, the drink OK, the men crap. Josie tittered to herself, releasing a belch into the gentle autumn night, not walking quite straight as she turned into the street for home.

But beneath her giggles and her party dress, she was sad. Her best friends had been planning their skiing holiday and chatting about their fast approaching university life. Josie hadn’t the money to go skiing and she wasn’t going to university. She’d joined in, but sadly. Before the party broke up in a familiar scurry for taxis, mobile phones and sports cars, Josie had left, needing to catch the last tube.

She was annoyed with her mum. She knew, as Zack had said, that their mother’s plight was in part self-inflicted. But what was she to do? Ignore her? Leave her without an income? Tell her to get on her bike, get a job, get on with life? Roll up her increasing depression and put it out with the garbage? Her seventeen-year-old self wanted life now, skiing now, A levels, university, career, everything. She wanted the life she’d been promised and was angry at whatever stood in its way.

She unlocked the front door. In the living room, a light was on. Helen Gradley sat in the armchair, head slumped, a needle of saliva hanging from her mouth. Her hands were blue.

‘Mum? Mum! Jesus Christ.’ Josie leaped to the phone, dialling 999. ‘Ambulance, please.’ She reached for her mother’s mouth. There was no flow of breath that she could feel. ‘It’s my mum. Please come quickly. I think she’s dead.’

Buying a company is no different from buying a used car. You can go for a test drive, you can lift the bonnet, you can haggle on price. But once you’ve handed over your money and driven away, there’s no comeback. When the car overheats, when the big end blows, when the hydraulic system escapes the engine in a cloud of steam, it’s tough.

Some people are experts. They can spot a repainted panel from twenty yards and a dodgy dealer from twenty miles. They don’t need help. They can do the whole job – inspect the car, negotiate a price, agree the deal – by themselves. Lucky them. But most people aren’t like that. We either call in experts to inspect the car – the AA, the RAC or whoever – or we get used to clouds of steam, expensive call-outs, and handing money over to people who burst out laughing as soon as we’ve left the forecourt.

It’s the same with companies. If you want to buy a company, then, before you scribble out your cheque, you’ll lift the bonnet and have a damn good look. And, unless you’re very smart or very foolish, you’ll want to have an expert with you when you do. What’s more, if you’re about to write a cheque for a hundred million pounds, or a billion, or more, you probably won’t mind writing a little tiny one – not more than one percent of the purchase price – to the expert who looks after you so well. The experts in company takeovers are called corporate financiers, and if the good ones aren’t always happy you can be sure it’s not for want of money. One percent of a billion is ten million pounds.

Right now, two corporate financiers from Coburg’s had the bonnet up and yawned with tedium.

The room they sat in was twenty foot by fifteen. One side was wall-to-wall windows with a view out over the sweeping roofs of Liverpool Street station. One wall held the door and a low side-table for coffees and suchlike. The other two walls were covered in pale beech shelving stacked with eighty-eight lever-arch files. A further six files lay open on the table in the middle. Each file was thick with documents. The index to the files was fifty-five pages long, plus a three-page ‘Guide to Additional Material’. Zack rubbed his eyes.

‘Jesus Christ. Is it always as dull as this?’

The two men from Tominto Oil had gone off for lunch, so Zack and Sarah could speak freely. It was weird working together. She was engaged to be married, he was as attracted to her as ever. They weren’t even friends, really, just colleagues. Perhaps they had never been friends, just lovers who argued. So now they kept themselves to themselves, talked about work, tried to be polite, to ignore the electricity which filled the air.

‘We’ve got ninety-four files to cover. That’s not so bad. I once saw a data room with three hundred and seventy files, for a deal that lasted a year and a half then never happened. That was bad.’

Sarah spoke dismissively. She felt uncomfortable. Putting the two of them in the same project team was like mixing air and petrol and hoping there wouldn’t be a spark. But Piers St George Hanbury, the project leader, didn’t know their history, and Sarah did her best to muffle the possibility of any real contact, let alone a spark.

They were part of a Coburg’s team helping a Texan oil company, Tominto Oil, buy a Scottish one. The Scottish one, Aberdeen Drilling, was being auctioned off by its parent company, which was currently talking to four serious bidders, including Tominto. Zack and Sarah and the two men from Tominto Oil were in the Aberdeen Drilling data room: the room which held every important document to do with the company. This was the Aberdeen Drilling engine, and the bonnet was up. Each bidder was allowed one week to look. They were allowed to read everything, take as many notes as they wanted, but they were allowed to copy nothing.

At the end of the week the bonnet would be brought down again and Tominto and Coburg’s would need to go away, discuss what they’d seen, and work out a price they’d be prepared to offer. If their bid was the highest of the four submitted, they’d sign a contract, buy the company, and drive it off into a happy, and hopefully breakdown-free, future. If their bid was one of the three lowest, the seller would shake his head, say so sorry, and leave them to watch all their work go swirling down the plughole. The Tominto people would go back to running their company and the Coburg’s corporate financiers would go chasing the next deal.

And what if the data room wasn’t complete? What if, amongst the myriad documents – management accounts, tax filings, statutory accounts, environmental reports, supply contracts, customer analyses, and a thousand other things – what if one or two nasty surprises were carefully left out, so that the poor old buyers didn’t have a clue? Well, it’s like the better end of the car trade. When you buy a company, you sign a contract which gives you a limited warranty. The warranty protects against any nasty surprises which you haven’t been told about. If something should have been in the data room and wasn’t, and it ends up costing you money, then you can go to the seller and demand a refund.

So sellers have a different strategy. Sellers put everything into the data room. Everything . They fill it as full as they possibly can. If they have time bombs, they bury them. They bury them under a mountain of detail so dull, that Buddha himself would kick the walls and scream. Every time Zack and Sarah were tempted to skip a page, they were stopped sharply by the thought that as they flicked forward they might miss it. The time bomb. The thing they were in the data room to find.