Pac-Man defense

The Pac-Man defense is a defensive option to stave off a hostile takeover in which a company that is threatened with a hostile takeover "turns the tables" by attempting to acquire its would-be buyer.

A major example in U.S. corporate history is the attempted hostile takeover of Martin Marietta by Bendix Corporation in 1982. In response, Martin Marietta started buying Bendix stock with the aim of assuming control over the company. Bendix persuaded Allied Corporation to act as a "white knight," and the company was sold to Allied the same year. The incident was labeled a "Pac-Man defense" in retrospect.

The name refers to the star of a video game Pac-Man, in which the hero is at first chased around a maze by 4 ghosts - Inky, Blinky, Clyde and Pinky. However, after eating a "Power Pellet", he is able to chase and devour said ghosts. The term (though not the technique) was coined by buyout guru Bruce Wasserstein.

Bibliography

• Big Deal: The Battle for the Control of America's Leading Corporations, Bruce Wasserstein, (1988, ISBN 0-446-67521-0)
• "Pac-Man Defense" http://www.investopedia.com/terms/p/pac-man-defense.asp

External links

• Preventive anti-takeover defenses: evidence from the French market for corporate control

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