Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Pac Man

What it is:

A Pac Man is a defense strategy for averting hostile takeovers.

How it works (Example):

Let's assume that Company ABC wants to purchase Company XYZ. Company XYZ's board does not want to sell the company to Company ABC, but Company ABC is threatening a hostile takeover. To ward off Company ABC, Company XYZ turns around and makes an offer to buy Company ABC.

In the 1980s Pac Man, Pac Man is able to eat a power pellet that gives him the power to eat the ghosts that are chasing him.

Martin Marietta Corporation introduced the Pac Man defense in 1982 by bidding for every company that was trying to buy it.

Why it Matters:

The Pac Man defense is a drastic step because it often requires targets to borrow or dip into cash to purchase potential acquirers.