Pac-Man Defense

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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.

INVESTOPEDIA EXPLAINS '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.

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RELATED FAQS
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    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 >>
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