Fat Man Strategy

AAA

DEFINITION of 'Fat Man Strategy '

A takeover defense tactic that involves the acquisition of a business or assets by a target company. The strategy is based on the premise that the bulked-up company - the "fat man" - would have reduced appeal to a hostile bidder, especially if the acquisition increases the acquirer's debt load or decreases available cash.

INVESTOPEDIA EXPLAINS 'Fat Man Strategy '

This is a type of "kamikaze" defense tactic, which inflicts potentially irreversible damage on a company to prevent it from falling into hostile hands. However, it involves adding assets rather than divesting them as is the case with other kamikaze defense strategies. A disadvantage of this tactic is that acquisition candidates need to be identified well in advance of a hostile bid, otherwise there may be insufficient time to complete a fat man transaction.

RELATED TERMS
  1. Sale Of Crown Jewels

    A takeover-defense tactic that involves the sale of the target ...
  2. Kamikaze Defense

    A type of takeover defense mechanism sometimes resorted to by ...
  3. Flip-Over Pill

    A type of poison pill strategy in which shareholders have the ...
  4. Corporate Raider

    An investor who buys a large number of shares in a corporation ...
  5. Black Knight

    A company that makes a hostile takeover offer for a target company. ...
  6. Hostile Takeover

    The acquisition of one company (called the target company) by ...
RELATED FAQS
  1. Why are the terms 'merger' and 'acquisition' always used together if they describe ...

    The terms "merger" and "acquisition" are used together because they both describe processes by which two companies become ... Read Full Answer >>
  2. What level of mergers and acquisitions is common in the chemical sector?

    The level of mergers and acquisitions (M&As) in the chemicals sector has surged to an all-time high since the turn of ... Read Full Answer >>
  3. How can a company buy back shares to fend off a hostile takeover?

    There are several reasons why a company may choose to repurchase some or all of the outstanding shares of its stock. This ... Read Full Answer >>
  4. How does the level of mergers and takeovers in the Internet sector compare to the ...

    The level of mergers and takeovers in the Internet sector is higher than in the broader market. The Internet sector contains ... Read Full Answer >>
  5. What business structures expose entrepreneurs to unlimited liability?

    A company that seeks to expand through a horizontal integration can achieve economies of scale, economies of scope, increased ... Read Full Answer >>
  6. What are the benefits of investing in a money market fund?

    The U.S. Department of Justice, or DOJ, and the Federal Trade Commission, or FTC, use the Herfindahl-Hirschman Index, or ... Read Full Answer >>
Related Articles
  1. Investing Basics

    The Merger - What To Do When Companies Converge

    Learn how to invest in companies before, during and after they join together.
  2. Mutual Funds & ETFs

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  3. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  4. Active Trading Fundamentals

    Trade Takeover Stocks With Merger Arbitrage

    This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
  5. Investing News

    Germany: Creating Climate For Tech Sector To Grow

    Many German companies, which are eager to catch up with the rest of the world by entering the digital age, are investing in tech startups.
  6. Investing

    American Airlines & US Airways Merger: It Matters!

    While the two airlines' merger creates a new giant in the industry and reduces choice for consumers and employees, investors should benefit.
  7. Professionals

    Due Diligence Tips for Investing in Alternatives

    Alternative investments can provide unique benefits to clients for whom they are suitable. But do your due diligence and beware of the risks.
  8. Investing

    Africa's Rapid Tech Advancement Drawing Investors

    The rapid adoption of technology, and the proliferation of startups, in Africa have created excellent investment opportunities.
  9. Economics

    What is a Management Buyout?

    A management buyout, or MBO, is a transaction where a company's management team purchases the assets and operations of the business they manage.
  10. Fundamental Analysis

    Explaining Enterprise Multiple

    The enterprise multiple is a ratio used to value a company as if it was going to be acquired.

You May Also Like

Hot Definitions
  1. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  2. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
  5. Variance

    The spread between numbers in a data set, measuring Variance is calculated by taking the differences between each number ...
  6. Terminal Value - TV

    The value of a bond at maturity, or of an asset at a specified, future valuation date, taking into account factors such as ...
Trading Center