Pac-Man

DEFINITION of 'Pac-Man'

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.

BREAKING DOWN 'Pac-Man'

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.

RELATED TERMS
  1. Pac-Man Defense

    A defensive tactic used by a targeted firm in a hostile takeover ...
  2. Hostile Takeover

    The acquisition of one company (called the target company) by ...
  3. "Just Say No" Defense

    A strategy used by corporations to discourage hostile takeovers ...
  4. Defensive Acquisition

    The act of firms acquiring other firms and assets as a defense ...
  5. Killer Bees

    An individual or firm that helps a company fend off a takeover ...
  6. Black Knight

    A company that makes a hostile takeover offer for a target company. ...
Related Articles
  1. Investing Basics

    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. Investing Basics

    What is a Takeover?

    A takeover happens when one company makes a bid to acquire a target company.
  3. 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.
  4. Options & Futures

    Pinpoint Takeovers First

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

    Hostile Takeover

    A hostile takeovers is an unfriendly acquisition attempt by a company or raider that is strongly resisted by the management and the board of directors of the target firm. Learn more about the ...
  6. Fundamental Analysis

    Reverse Takeover

    Learn more about this type of takeover and how companies use it to avoid IPOs.
  7. Active Trading

    Guard Your Portfolio With Defensive Stocks

    Find out how these securities can protect you from a market bust.
  8. Bonds & Fixed Income

    Trademarks Of A Takeover Target

    These tips can lead you to little companies with big prospects.
  9. Investing Basics

    How To Profit From Mergers And Acquisitions Through Arbitrage

    Making a windfall from a stock that attracts a takeover bid is an alluring proposition. But be warned – benefiting from m&a is easier said than done.
  10. Investing Basics

    Poison Pill

    A poison pill is a corporate maneuver put in place to try and prevent a hostile takeover. The target corporation uses this strategy to make its stock less attractive to the acquirer. This is ...
RELATED FAQS
  1. What is the Pac-Man defense?

    The Pac-Man defense is a strategy in which a company that is facing a hostile takeover from another company essentially turns ... Read 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 Answer >>
  3. 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 >>
  4. How can a company resist a hostile takeover?

    Learn about some of the defense strategies a public company's board of directors might employ to prevent a hostile bidder ... Read Answer >>
  5. What is the difference between a hostile takeover and a friendly takeover?

    Learn about the difference between a hostile takeover and a friendly takeover, and understand how proxy fights and tender ... Read Answer >>
  6. How can a company buy back shares to fend off a hostile takeover?

    Learn about why a business might use a stock buyback to thwart a hostile takeover attempt by reducing its total assets and ... Read Answer >>
Hot Definitions
  1. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  2. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  3. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  4. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  5. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  6. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
Trading Center