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Loose Lips Sink Deals

by Bruce Haring

During World War II, spying was a major thorn in the side of the Allied Forces. It became imperative to warn workers in various capacities to watch what they said. “Loose Lips Sink Ships” signs were posted everywhere, a reminder that whatever was said could be used against us.

But the practice of keeping a tight rein on your secrets extends to more than the war effort. The process of leaking information has a well-established history of nipping deals in the bud, either because the information was released prematurely, was used to gain advantage in a deal, or simply was not firmly decided by both parties. The Securities and Exchange Commission requires a “silent period” before a public offering, a period where even the most talkative executives have to keep a lid on their chatty exchanges because of fears of hyping the stock with bad information.

Dr. Dre knows of what we speak. His billion-dollar deal to have his Beats music company acquired by Apple is apparently on hold — and maybe scotched — allegedly because he bragged on a YouTube video about his soon-to-be-acquired fortune.

It’s probably far-fetched to think that corporations, even ones as buttoned-down as Apple, would freak out that much when it comes to leaked business deals. The Beats/Apple marriage delay is more likely because of tax and other deal points yet to be worked out. Some mergers and acquisitions experts even think leaks such as Dre’s can drive a deal to completion, forcing the buyer to declare its interest.

But there are risks. One side or the other can take umbrage at the leaks, and there are legal ramifications that can derail the deal.

Entertainment Not So Sticky

The world of business takes leaks far more seriously than the entertainment world does on its deals, but there are some sticky moments in the latter. Quentin Tarantino recently decided that leaks surrounding his film The Hateful Eight came from a small circle of actors who had access to the script. He threw a fit and put the project on hold, meaning no one would have work. It’s likely he’ll pick up on the project, though, as he noted at the recent Cannes Film Festival that he’s since “calmed down” about the situation.

In music, leaks of new albums are almost part of the publicity process. They’re usually done on projects that need a little extra attention, as the companies themselves do the leaking so they can scream with outrage that their new album is getting airplay.

A report of 4,000 business transactions from 2004 to 2012 by the Cass Business School and data room company IntraLinks said information leaks can help distort a deal, leading to insider trading on shares. Although activity has dropped on such leaks over the last few years, the SEC remains vigilant — and somewhat eager to stop any such activity.

But our beloved government is no stranger itself to leaks that can cause damage. The revelations of National Security Administration spying have caused problems for US companies operating abroad. Saab of Sweden this month won a US $4.5 billion order to supply 36 jet fighters to Brazil, beating Boeing of the United States for the deal. President Dilma Rousseff of Sweden said the US spying was an “affront” to her country, and no doubt greased the skids for Boeing.

The lesson from all of this? Keep your information closely held if you have a big deal pending. Or as Dr. Dre himself said in his classic “Forgot About Dre,” “Ya’ll know me still the same OG/But I been low key.” Evidently the physician should have been trying to heal himself.

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