told me this sooner?’
‘Yes, I understand. The problem was very carefully hidden, and it took us some time to spot it. But we thought you would sooner know late than not at all.’
‘You’re telling me,’ growled Daggert. Tominto Oil was worth about a billion dollars and Daggert owned about five percent of it. Hank Daggert wasn’t exactly a sweet old man, but if you were a shareholder in Tominto Oil you loved him just the same. ‘Just take me through the problem one more time. I want to be sure I understand.’
Piers Hanbury was too important to care much about details. He was one of the biggest deal-makers in the City of London and he wasn’t unduly fussed over a hundred million pound deal with a miserable little million pound fee. He was there to look distinguished and make the client feel happy.
‘Zack, why don’t you walk us through this?’ said Hanbury smoothly. ‘It’s your discovery, after all.’
Hanbury was polite in front of a client, but he’d been absolutely furious with Zack the day before. ‘Why the hell didn’t you bring this up sooner? We don’t stand a chance of doing the deal now.’ Hanbury was sore.
One thing about buying companies is different from buying a car. With a car, when you call out the AA to inspect it, you pay the AA a flat fee irrespective of whether you end up buying the car. That way you can be sure of getting impartial advice. If you agreed to pay only if the inspection was clean, you’d find yourself with clean reports for cars only a tow-ride away from the breakers’ yard.
For some reason, which no one on earth can explain, it doesn’t work like that when it comes to buying companies. Corporate financiers only get paid if they win the deal, if their client beats the other bidders. The temptation to encourage the client to bid too much is almost overwhelming – and every now and then, there are those who don’t try so hard to resist. Piers St George Hanbury was one of them. If Zack had found the problem when they were in the data room a couple of weeks back, Hanbury would have found other reasons for getting Tominto Oil to pay up for Aberdeen. But now they’d debated the price and fixed it, when bloody Zack Gradley comes along with a ten million pound hole. The deal was running into the sand.
‘OK,’ said Zack. ‘The seller had a problem. They were all ready to sell Aberdeen Drilling, when along comes a major headache. A Norwegian consultancy project they’d worked on returned to haunt them. They’d advised on the construction of a North Sea pipeline into Bergen. They did their work, got paid, and forgot about it. But to win the contract, they had offered a guarantee. Either the work’s OK or they’d pay to put it right. That was the deal.
‘Now, just as they were getting ready to invite you guys into the data room, the Norwegians come along. It turns out there was a major foul-up which the Norwegians say is the fault of Aberdeen Drilling. Well, maybe, maybe not. It hasn’t been tested in a court of law, but let’s just suppose the Norwegians are right and Aberdeen did screw up.
‘Normally, that wouldn’t be too bad. They’ve got insurance. If they have to pay out to the Norwegians, they just get the cash back from the insurers. But here’s the problem. When they signed the Norway contract, they weren’t insured. There was a cock-up in accounts and they were a week late in making a premium payment, something to do with staff sickness, I think. Anyway, the week the contract was signed, they weren’t insured. The sellers are desperate to sell before the liability hits, plus they want to make sure the buyers don’t see what’s coming.’
‘But you said all this was in the data room? Why would they go and tell us if they wanted to keep it quiet?’
Zack smiled.
‘They had to put it in the data room or else you could claim the money back on the warranty. So what they did was smart. They dismantled their time bomb. They broke it into four little pieces and hid three of them in the data room and one in the press. Any of those bits on their own is harmless. But the four of them together stand to make a very loud bang.’
‘Go on.’
‘The first part of the bomb was concealed in some standardised consultancy agreements. That’s where they told us that all their consultancy work was guaranteed. Any problems down the line would need to be paid for. The second part of the bomb was buried in a footnote way down in a mountain of stuff to do with insurance contracts. The footnote pointed out that there was a period of a few days where these insurance arrangements didn’t apply. The third part of the bomb was a note mentioning when the Norwegian contract had been signed, which was – surprise, surprise – bang in the middle of the time when the insurance was on the blink. If you like, the deal was signed after the insurance had passed its sell-by date.
‘And here’s the clever bit. The most dangerous part of the bomb – the bit which would have aroused our suspicions instantly and sent us hunting down all the other parts – they didn’t even put inside the data room.’
‘But I thought –’ began Daggert.
Zack cut him off. ‘Yes. You thought that if they didn’t put something in the data room, then we were covered by the warranty. That’s true – unless that thing was already public knowledge, defined as something already being in the press. So what they do is, they take their bomb’s most dangerous part to a Norwegian journalist. A journalist who works for a Norwegian oil industry magazine with a circulation of about five thousand. They say what they have to say. The journalist writes a couple of paragraphs, in Norwegian of course, and bungs it in the magazine. Hey presto. It’s public knowledge. The story’s not big enough to be picked up elsewhere, and if it is, it’ll probably hit the English-language journals too late for the deal. After all, there aren’t all that many people with fluent Norwegian and an avid interest in the offshore oil business.’
Daggert shook his head. ‘So how the hell did you guys find this bomb? You read Norwegian oil industry magazines for fun?’
Zack shook his head. ‘Thinking about the data room afterwards, I realised that they’d concealed the first three pieces very carefully. They were a long way apart. Each one was buried in documents almost too boring to read. I realised that they had a perfect bomb, all they needed was some explosive. So then I started looking for the explosive. We used our databases to search the English-language press, then the press worldwide. Up pops this Norwegian article which mentions a sum of ten million pounds. And there we had it: a bomb, primed and ticking.’
Zack tossed the article across the desk with a translation. Daggert scanned it. It didn’t say much: just that there was a problem and that the Norwegians would be putting in a claim for the money. But it was enough.
‘You got notes on the other stuff, the other parts of the bomb?’ Zack shook his head. Daggert looked at his two subordinates: the ones who had been with Zack and Sarah in the data room. ‘Did you pick up this stuff?’ They both shook their heads and the more senior guy glowered at the junior guy, as though it was his fault. Daggert’s voice grew sharper. ‘You don’t have any record of this and you want me to drop my bid by ten million pounds?’
Hanbury leaned forward. Here was a chink of light. They could be honest with the client, but still maybe encourage the client not to change his bid. That would be the best of all worlds. He began to speak, but the arrogant young Gradley beat him to it.
‘I do have records, just not written ones.’
‘What?’ Daggert was pissed off. Was Gradley playing games?
‘I have a good memory. I don’t forget a fact.’
Daggert
