A:

The Pac-Man defense is a strategy in which a company that is facing a hostile takeover from another company essentially turns the tables and attempts to purchase the would-be buyer. The defensive strategy gets it name from the popular arcade video game of the 1980s - Pac-Man. In the game, Pac-Man's initial goal is to evade the enemies chasing him. However, when Pac-Man consumes the "power pill", he is able to turn around and eat the enemies that once had been in pursuit of him.

In business, if Company A shakes off an acquisition attempt by Company B, Company B is said to be executing a Pac-Man defense if it then turns the tables and attempts a takeover of Company A.

For more on this topic, read Corporate Takeover Defense: A Shareholder's Perspective.

This question was answered by Bob Schneider.

RELATED FAQS
  1. How do companies use the Pac-Man defense?

    To employ the Pac-Man defense, a company will scare off another company that had tried to acquire it by purchasing large ... Read Answer >>
  2. Under what circumstances might a company decide to do a hostile takeover?

    Learn about why companies use a hostile takeover to gain control of another company, and understand the different methods ... Read Answer >>
  3. What is the difference between a poison pill defense and a suicide pill defense?

    Learn about different strategies a company uses to prevent hostile takeovers and the main difference between a poison pill ... Read Answer >>
  4. Why is buying a utility stock known as defensive move?

    Utility stocks are known as defensive stocks for investors due to the fact that consumer demand will remain high even when ... Read Answer >>
  5. What happens to the shares of a company that has been the object of a hostile takeover?

    Learn about the effect on the share price of companies that are targets of hostile takeovers, which are tactics used by famed ... Read Answer >>
  6. Why is a shareholder rights plan called a "poison pill?"

    Discover why shareholder rights plans are often called "poison pills" to fight hostile takeovers and give smaller corporations ... Read Answer >>
Related Articles
  1. Investing

    Warding Off Hostile Takeovers

    The purpose of this article is to provide a general overview of hostile corporate takeovers, while highlighting a general course of action against such activity. This article provides basic information ...
  2. Insights

    Facebook Messenger Adds More Gaming Features (FB)

    Users can play games like PAC-MAN, SPACE INVADERS, and more within Facebook's Messenger app.
  3. Investing

    Guard Your Portfolio With Defensive Stocks

    Find out how these securities can protect you from a market bust.
  4. Investing

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  5. Investing

    What Will Trump's Defense Boost Do For Stocks?

    President Trump will seek to increase defense spending by 10% for the 2018 proposed budget. How could this affect defense stocks?
  6. Investing

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  7. Investing

    Reverse Takeover

    Learn more about this type of takeover and how companies use it to avoid IPOs.
  8. Small Business

    5 Big Companies' Biggest Blunders

    These companies were once at the top of their leagues, but have since fallen to near-obscurity.
  9. Investing

    A Review Of Defense Stocks

    2010 could be a good year for defense stocks. Find out why.
  10. Trading

    Game on for Activision and Electronic Arts

    Activision and Electronic Arts earnings reports should confirm healthy industry growth, allowing both stocks to trade higher into mid-year.
RELATED TERMS
  1. Pac-Man

    A high-risk hostile takeover defense in which the target firm ...
  2. Killer Bees

    An individual or firm that helps a company fend off a takeover ...
  3. Leveraged Recapitalization

    A corporate strategy in which a company takes on significant ...
  4. Suicide Pill

    A defensive strategy by which a target company engages in an ...
  5. Poison Put

    A takeover defense strategy in which the target company issues ...
  6. Defensive Stock

    A stock that provides a constant dividend and stable earnings ...
Hot Definitions
  1. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
  2. Pro-Rata

    Used to describe a proportionate allocation. A method of assigning an amount to a fraction, according to its share of the ...
  3. Private Placement

    The sale of securities to a relatively small number of select investors as a way of raising capital.
  4. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  5. Backward Integration

    A form of vertical integration that involves the purchase of suppliers. Companies will pursue backward integration when it ...
  6. Pari-passu

    A Latin phrase meaning "equal footing" that describes situations where two or more assets, securities, creditors or obligations ...
Trading Center