A high-risk hostile takeover defense in which the target firm tries to take over the company that has made the hostile bid by purchasing large amounts of the would-be acquirer's stock. The Pac-Man defense is supposed to scare off the would-be acquirer, which doesn't want to be taken over itself. The target may sell off its own assets or borrow heavily in order to acquire enough of the acquirer's stock to prevent the takeover.


The Pac-Man defense does not always work, but it was first successfully used in 1982 by Martin Marietta to prevent a takeover by Bendix Corp. In 1988, American Brands used it successfully against E-II, and TotalFina used it in 1999 to prevent a takeover by Elf Aquitaine. Some analysts speculated that Cadbury would try to use the Pac-Man defense against Kraft in 2009.

The Pac-Man defense may be used alone or in conjunction with other takeover defenses, such as the white knight.

  1. Lobster Trap

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  2. People Pill

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  3. Macaroni Defense

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  6. Target Firm

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  1. What happens to the stock prices of two companies involved in an acquisition?

    When a firm acquires another entity, there usually is a predictable short-term effect on the stock price of both companies. ... 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 >>

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