Pac-Man Defense


DEFINITION of 'Pac-Man Defense'

A defensive tactic used by a targeted firm in a hostile takeover situation. In a Pac-Man defense, the target firm turns around and tries to acquire the other company that has made the hostile takeover attempt. This term has been accredited to Bruce Wasserstein, chairman of Wasserstein & Co.

BREAKING DOWN 'Pac-Man Defense'

This term comes from the Pac-Man video game. In the game, once Pac-Man eats a power pellet he is able to turn around and eat the ghosts that are chasing after him in the maze.

When one company makes an unsolicited and aggressive bid on another publicly traded company, the takeover attempt may not be welcomed by the targeted firm. In an attempt to scare off the would-be acquirers, the takeover target may use any method in an attempt to acquire the other company, including dipping into its war chest for cash to purchase the other company's stock.

  1. Shark Repellent

    Slang term for any one of a number of measures taken by a company ...
  2. Suicide Pill

    A defensive strategy by which a target company engages in an ...
  3. Scorched Earth Policy

    A takeover prevention strategy in which the target company seeks ...
  4. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  5. War Chest

    A colloquial term for the reserves of cash set aside or built ...
  6. Poison Pill

    A strategy used by corporations to discourage hostile takeovers. ...
Related Articles
  1. Fundamental Analysis

    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.
  2. Options & Futures

    Bloodletting And Knights: Medieval Investment Terms

    From bloodletting to ye olde black knights, things on Wall Street are getting downright medieval!
  3. Mutual Funds & ETFs

    Corporate Takeover Defense: A Shareholder's Perspective

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

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  6. Investing

    What’s the Difference Between Duration & Maturity?

    We look at the meaning of two terms that often get confused, duration and maturity, to set the record straight.
  7. Markets

    10 Most Famous Leveraged Buyouts

    Learn about the boldest, riskiest leveraged buyouts in history and how they either become famous for failing miserably or making billions.
  8. Stock Analysis

    Is There Any Upside Left for Walgreens?

    Walgreens is about to get much bigger, but does bigger equal better in this case?
  9. Stock Analysis

    Top 10 Companies Owned by Amazon

    Learn about what has made Amazon so successful over the years. Learn about 10 of the most important companies that Amazon has acquired.
  10. Fundamental Analysis

    ABInBev and SABMiller Merger: The Facts

    Beer is a big business. In the United States, beer sales generated more that $101 billion in revenue.
  1. When is a takeover bid legally canceled?

    When a firm makes an official bid to take over a target company, a legal offer is created. The firm making the offer becomes ... Read Full Answer >>
  2. 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 Full Answer >>
  3. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  4. What happens to the shares of stock purchased in a tender offer?

    The shares of stock purchased in a tender offer become the property of the purchaser. From that point forward, the purchaser, ... Read Full Answer >>
  5. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  6. Are companies with high Book Value Of Equity Per Share (BVPS) takeover targets?

    Companies with high book value of equity per share (BVPS) can be good takeover targets if those companies are public and ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  2. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  3. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  4. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
  5. Quick Ratio

    The quick ratio is an indicator of a company’s short-term liquidity. The quick ratio measures a company’s ability to meet ...
  6. Black Tuesday

    October 29, 1929, when the DJIA fell 12% - one of the largest one-day drops in stock market history. More than 16 million ...
Trading Center