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Pac-Man Defense


The Pac-Man Defense is a strategic maneuver employed by a targeted company during a hostile takeover attempt. It involves the targeted company turning the tables and attempting to acquire the potential acquirer. This move aims to deter the hostile bid by placing increased financial burden and risk on the potential acquirer, making the takeover less attractive or unfeasible.


The phonetics for “Pac-Man Defense” can be represented as:P: /p/ as in “pen”A: /æ/ as in “cat”C: /k/ as in “cat”- : a hyphen to separate the two wordsM: /m/ as in “man”A: /æ/ as in “cat”N: /n/ as in “no”(space)D: /d/ as in “dog”E: /ɪ/ as in “defense”F: /f/ as in “find”E: /ɪ/ as in “defense”N: /n/ as in “no”S: /s/ as in “sun”E: /i/ as in “see”So, the phonetic pronunciation of “Pac-Man Defense” is /pæk-mæn dɪˈfɛn si/.

Key Takeaways

  1. Pac-Man Defense as a strategy: Pac-Man Defense is a strategy employed by a company to prevent a hostile takeover attempt. To do this, the targeted company either purchases large amounts of its own stock to dilute the shares or tries to acquire the hostile bidder instead.
  2. Prevents loss of control: One main purpose of the Pac-Man Defense strategy is to prevent the loss of control that occurs when a hostile bidder acquires a majority stake in the targeted company. This tactic can potentially scare off the bidder and maintain the targeted company’s independence and management.
  3. Cost and consequences: The Pac-Man Defense can be expensive and might have significant consequences for the targeted company, such as increased debt, a higher number of outstanding shares, and potentially causing the company to become a less attractive investment option.


The Pac-Man Defense is an important business/finance strategy used by a targeted company to prevent a hostile takeover by turning the tables on the acquiring company. This defensive strategy derived its name from the popular 1980s video game, Pac-Man, in which the game character avoids being captured by its pursuers and then counter-attacks by consuming them. In the context of mergers and acquisitions, the targeted company would fend off a hostile takeover by attempting to acquire the would-be acquirer, thereby significantly raising the stakes and creating a potential deterrent for the acquiring company. This tactic is crucial because it provides companies with a powerful countermeasure to aggressive takeover attempts, enabling them to safeguard their autonomy, strategic vision, and ultimately their stakeholders’ interests through an assertive and potentially costly response.


The Pac-Man Defense is a tactical maneuver employed by companies when they face hostile takeover attempts. It serves to protect the targeted firm’s autonomy and hinder its disruption by external entities who might be interested in acquiring a controlling stake or exerting undesirable influence on their decision-making processes. This defense strategy is named after the iconic video game, “Pac-Man,” where the main character consumes the ghosts chasing it. Similarly, the targeted company attempts to “turn the tables” on the bidder by acquiring a significant portion or even launching a counter-takeover bid. In practice, the Pac-Man Defense helps to ensure the long-term stability and growth prospects of a company, by giving management the chance to defend their business model and strategy from hostile bidders. The targeted company may accomplish this by purchasing the acquirer’s shares in the open market or by using financial leverage to amass sufficient capital to mount a counter bid. While this strategy can be costly and risky for both parties involved, it can ultimately serve to deter corporate raiders or force hostile bidders to reassess their takeover bids, leading to more favorable terms for the targeted company or even abandonment of the takeover attempt.


The Pac-Man Defense is a defensive strategy used by a target company to avoid a hostile takeover by turning the tables and attempting to acquire the would-be acquirer. This term was coined in the 1980s and derives its name from the Pac-Man video game, where the player’s character can consume ghosts that are trying to capture it. Here are three real world examples of the Pac-Man Defense: 1. Bendix Corporation and Martin Marietta (1982): In one of the most famous instances of the Pac-Man Defense, Bendix Corporation launched a hostile takeover bid for Martin Marietta, an aerospace manufacturer. In response, Martin Marietta acquired enough shares in Bendix to launch a counter-takeover, effectively forcing Bendix’s management to negotiate a merger on terms more favorable to Martin Marietta. Ultimately, Bendix was acquired by Allied Corporation, ending the takeover battle. 2. TotalFina and Elf Aquitaine (1999): In this European example, French oil and gas company TotalFina launched a hostile takeover bid for its rival, Elf Aquitaine. As a defensive measure, Elf Aquitaine began acquiring TotalFina shares in an attempt to launch a counter-takeover. Eventually, the two companies reached a negotiated agreement and merged to form TotalFinaElf, which later became Total S.A., one of the world’s largest integrated oil and gas companies. 3. MCI Communications and British Telecom (1996): MCI Communications, a major telecommunications company, was facing a hostile takeover bid by British Telecom (BT), which already owned a stake in MCI. In response, MCI Communications began buying up shares of BT to prevent the takeover. Ultimately, Worldcom stepped in with a competing takeover bid and successfully acquired MCI Communications. This acquisition eventually led to the formation of MCI Worldcom, which later was rebranded as Worldcom after facing financial difficulties.

Frequently Asked Questions(FAQ)

What is the Pac-Man Defense?
The Pac-Man Defense is an aggressive business strategy used by a target company to thwart a hostile takeover attempt by turning the table and attempting to acquire the firm pursuing the takeover. It is named after the popular 1980s video game Pac-Man, where the player can turn around and eat the ghosts trying to catch them.
How is the Pac-Man Defense carried out?
To execute a Pac-Man Defense, the target company usually starts acquiring significant amounts of the hostile bidder’s stock in the open market, and may even attempt a full-fledged takeover. This sudden reversal can create uncertainty and potential financial difficulty for the bidding company, deterring them from continuing their initial takeover attempt.
Why would a company utilize the Pac-Man Defense?
This strategy is typically used when a company wants to preserve its independence or avoid being acquired by a hostile bidder. The Pac-Man Defense forces the hostile bidder to either abandon or reconsider their takeover attempt due to the financial risk and potential loss of control.
What are the potential risks of using the Pac-Man Defense strategy?
The Pac-Man Defense typically requires significant financial resources to acquire substantial stakes in the hostile bidder’s company. The target company may need to take on additional debt or divert funds from other operations, potentially affecting its long-term financial health. Additionally, if the target company acquires the hostile bidder, it needs to ensure proper integration and management of the merged entities to avoid operational disruption and a decrease in shareholder value.
Are there any examples of companies using the Pac-Man Defense successfully?
A notable example of the Pac-Man Defense occurred in 1982 when the energy company, Bendix Corporation, launched a hostile takeover bid for Martin Marietta Corporation. In response, Martin Marietta counterattacked by acquiring Bendix’s shares, eventually leading to Bendix’s acquisition by another company, Allied Corporation.
Can the Pac-Man Defense be combined with other defensive strategies?
Yes, the Pac-Man Defense can be combined with other strategies, such as the Poison Pill, White Knight, or creating a Staggered Board, to enhance the target company’s position and discourage hostile takeover attempts further.

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