At least some of the most delicate questions have already been ironed out: Should the mega-merger between Deutsche Börse and the London Stock Exchange go ahead, a new holding company will be based in London. The new chief executive? Probably Deutsche Börse CEO Carsten Kengeter.
But what about the name? According to financial circles, that name of the new holding company has yet to be determined. Developers of brand names are reportedly working on suggestions. Employees may be polled for their suggestions, And there are rumors that the lawyers who will examine the feasibility of these ideas are already waiting in the wings.
The importance of a new name shouldn’t be underestimated. The combined company could be the second largest stock-exchange opeator in the world. And while the two companies’ operations and their brands will be preserved after the wedding – both will maintain headquarters in Frankfurt and London – the joint holding company in London will need to stand out on its own.
“A merger like this offers the opportunity to create a completely new brand. The exchanges can use the name to define how they are jointly viewed,” Manfred Gotta, a German consultant considered an expert in finding company names, told Handelsblatt. “You have to have the courage to create a new brand.”
But politics also inevitably comes into it – especially when it comes to multinational mergers.
Name combinations rarely work. One partner sees himself in the front and the other in the back. Manfred Gotta, Naming Consultant
"We are aware that this is a sensitive topic," said one financial insider. “The Germans would like to see the word 'Deutsche' in the name and the British would like to see 'London.'"
Still, it is apparently possible that the reference to Germany will disappear from the name entirely. After all, the country itself would only contribute a small portion to the revenue of the new group – even Deutsche Börse itself generates much of its sales abroad.
Many multinationals have plumped for the combined approach: Daimler-Chrysler, NYSE-Euronext, AOL Time Warner, ArcelorMittal and more recently LafargeHolcim and DowDuPont. It’s worth noting that the first three examples eventually split again.
But Mr. Gotta suggested that jettisoning one or the other might be a good start: “Name combinations rarely work. One partner sees himself in the front and the other in the back,” he said.
Deutsche Börse knows the challenges better than most, having failed in a series of past attempts to merge with London, and with the New York Stock Exchange. As it has repeatedly learned in the past, the name can be extremely important when exchanges merge.
In 2011, Reto Francioni, Carsten Kengeter's predecessor as head of Deutsche Börse, tried to merge the group with the American NYSE Euronext exchange. As Duncan Niederauer, the then chief executive of the New York Stock Exchange, noted early on, "the name is an emotional issue."
He would prove to be right. Exchange employees submitted 1,300 suggestions for a new name. One of the proposals at the time was to name the new holding company the DB NYSE Group.
But Democratic Senator Charles Schumer was quick to point out that the name was out of the question, and that the cult NYSE brand ought to receive prominent placement. "It's a symbol that New York is still the world's financial capital," Mr. Schumer said in a hearing in Washington.
The deal ultimately fell apart, not because of the name issue, but in the face of opposition from European competition watchdogs, who feared the market titan could acquire a dominant market position.
This time, politicians in Berlin and London have signaled cautious restraint, though a similar survey among employees is also anticipated for the current merger between the Frankfurt and London exchanges.
The merger is a "business matter between two companies," British Ambassador Sir Sebastian Wood said on Thursday at the Club of the Munich Business Press.
European Union Commissioner Günther Oettinger, a German national, on Friday said he welcomed the consolidation of European exchanges and hoped antitrust authorities in Brussels would give the deal a fair hearing, according to Reuters.
One financial insider who has witnessed several mergers believes it is unlikely that London or Frankfurt will be part of the name of the holding company, noting that the risk of foreign sensitivities being violated was too high.
Name expert Manfred Gotta, who devised the name for the Xetra trading system for Deutsche Börse, warns: "Name combinations rarely work."
He believes a new, artificial name for the joint holding company is the best way to go. But even that can go wrong.
In the first attempt at a merger between Deutsche Börse and LSE in the early part of the last decade, the joint company was to be named iX, for International Exchange. But then it was discovered that that was already the name of a German magazine. However, those merger plans did not fail because of the naming controversy, but because the London Stock Exchange pulled out of the deal.
Mr. Gotta has one more piece of advice: Get rid of “exchange” in the name. “Exchanges always include the word 'exchange' in the name, fearing that otherwise no one will know what is meant. This is nonsense.”
Mr. Gotta said he has yet to be contacted by Deutsche Börse for his advice, but then it’s still early days. A number of more important details still need to be worked out between the two sides – and counter-offers for LSE from rival U.S. exchanges need to be fended off.
Michael Brächer is a financial correspondent for Handelsblatt based in Frankfurt. Katharina Slodczyk covers the British financial sector for Handelsblatt in London. To contact the authors: [email protected] and [email protected]