Expectant parents aren`t the only ones who could use some help picking a name.
For the first time in five years, Wall Street saw a jump in corporate name changes during the first half of 1992.
More than 650 new corporate names popped up in those six months, up 41 percent from the same period last year, according to Anspach Grossman Portugal Inc., a corporate identity firm in New York.
But while makeovers in the mid-1980s clearly reflected the rapid growth and aggressive takeovers of the decade, this year`s increase mirrored some of the mergers, restructurings and failures in today`s uncertain economy.
”The changes in the `80s were the result of growth and takeovers. In 1992, they`re the result of more restructuring, simplifying and spinning off of other companies,” said Joel Portugal, a partner with Anspach Grossman Portugal.
Though the rise is certainly a sign of increased business activity, it`s not necessarily a reliable economic indicator or a cause for celebration, he warned. ”Banks are merging and changing their names. Did those mergers come about because of economic improvements? I don`t think so.”
What`s different is the spirit, or lack of it, behind the changes.
”We`re seeing more conservative name changes. It reflects what`s going on in business and society,” Portugal said. ”We`re seeing it in the way people dress and in advertising. Corporations are reacting to that.”
Another corporate identity firm, the Schechter Group in New York, noticed the same traditionalism in a recent informal survey of securities analysts, who were asked about their likes and dislikes in corporate names. Why ask them?
”Analysts are the most influential investors. We wanted some guidelines, so we asked for their opinion,” said Alvin Schechter, chairman and chief executive of the Schechter Group.
”We found them to be very traditional and a little bit-I wouldn`t say lazy-but lacking in imagination. They don`t like to have to think too hard,” Schechter said.
For that reason and more, changing a corporation`s name is an agonizing decision, not unlike what a couple goes through months before the birth of a child.
But while expectant parents need only worry about offending a few possible namesakes, a chief executive has to consider not only rigid-thinking analysts on Wall Street but also cranky shareholders, an entrenched corporate culture and a cost that could run into the millions.
Sometimes they strike gold as when Consolidated Foods changed its name in 1985 to Sara Lee, capturing Wall Street`s attention and helping catapult it from first to sixth place among Fortune magazine`s most admired food companies.
But another Chicago-based company, UAL Corp., encountered more snickers than applause when it briefly changed its name to Allegis, which many thought was more suitable for a disease than a travel-industry giant.
That helps explain why there are fewer, among other things, abbreviated names-like Tenneco, Teledyne and Witco, which popped up during the more experimental `60s-and more names seeking only to clearly define what a company does, Portugal said.
The financial-services industry, which accounted for the largest portion-36 percent-of the name changes so far this year, saw Security Pacific renamed BankAmerica and the birth of NationsBank from the merger of C&S/Sovran and NCNB.
”They`re trying to make them sound like real words even though they`re coined names,” Portugal said. ”Navistar (formerly International Harvester)
isn`t a real word, but it sounds like it could be. And NationsBank gets the idea across that this is going to be a national bank.”
Coining a name that-sort of-sounds like a real word, combining names when there`s a merger or using the name of a company`s most widely known brand, have been the most common strategies in recent years mainly because nearly all the established words are legally taken, he said.
That may explain the preponderance of functional, though uninspired names, such as Bristol-Myers Squibb Co., Time Warner Inc. and Arizona Instrument Corp. (from Quintel Corp.).
Partly responsible for such safe choices is the influence of the investment community, Schechter said.
In his firm`s survey, analysts gave high points to companies that were renamed after a dominant brand, such as Sara Lee and Paramount (formerly Gulf & Western), and to those name changes that spelled out the company`s primary business, such as Collins Food to Sizzler International and United Brands to Chiquita Brands.
They hated coined names like the futuristic-sounding Amdura, Zemex, Imcera and Aon. ”I hate names formulated by committee or computer,” one analyst said in the survey.
Aon is neither futuristic nor a coined word. It`s a Gaelic word signifying ”oneness, unity and coming together,” which Patrick Ryan, the chief executive and dominant shareholder, chose because it signified the purpose behind the merger of Chicago-based Combined International Corp. and Ryan Insurance.
And though five years later analysts still give it a thumbs down, more than 96 percent of the company`s shareholders approved of the change back in 1987.
The name of another area company, Imcera in Northbrook, got a low grade as well. ”Really bad,” one analyst said. International Mineral & Chemical Corp., recognized more as IMC, changed its name in 1990 because it had sold its minerals business and was moving into biotechnology and other fields.
It is not merely a computer-generated name, said company spokesman David Prichard.
”It incorporates IMC to remind people of who we are, and the last half is there simply to describe where we are headed-into a new era,” Prichard said.
Schechter said he was shocked by the analysts` strong reactions to certain names.
”They claim to be numbers driven,” he said. ”But they`ve developed quite a distaste for a number of names. They`re very busy and they don`t want to have to think too long to remember what a company is all about.”
And they may be a little too stubborn, especially when it comes to coined names.
”There has to be room for names that are made up,” Schechter said.
”Look at Kodak and Xerox.”
But all the debate over which name changes are most effective may be unimportant, since the act of changing a name alone, in most cases, seems to have a positive effect on a company`s stock, according to a study conducted by the Amos Tuck School of Business Administration at Dartmouth.
The research was done for Anspach Grossman Portugal.
Of the sampling of 355 name changes that occurred from 1962 to 1985, the study found that the stock price of those companies increased an average of 0.9 percent three days before an anouncement in the Wall Street Journal.
An adoption of a personal name (the name of an owner or founder, for example) saw the best results, with an increase of 4.2 percent nine days after the announcement.
The only negative effects were found in rare cases in which a company had adopted the name of a brand, an acquirer or a descriptive name.
