The pac man defense is a defensive tactic used by a targeted firm in a hostile takeover situation. Essentially, the pacman defense is used to make a takeover very difficult for the wouldbe acquiring firm. The term was coined by buyout guru bruce wasserstein. Pacman has been licensed to more than 250 companies for over 400 products. This takeover prevention strategy is implemented by the target company turning things around by trying to take over the acquirer. Til the pacman defense is when a company being bought. Pownall, who popularized the pacman defense in business circles when he daringly used it to ward off a legendary 1982 hostile takeover of his martin marietta, has died at age 83. Pacman defence definition of pacman defence by the free. Hostile takeover learn about hostile takeover strategies. Pacman defense mergers and acquisitions merger arbitrage. The socalled pac man defense rarely has been used since the takeover wave of the mid. This term was coined in america in 1982 it is another takeover repellent devised by management under this strategy attempts are made to take over the hostile raider. The target company reacts by attempting to gain control of the corporate raider.
Jan 23, 1988 the pac man defense, named for a video game, seemed so drastic to wall street, in fact, that it was not tried again until this week, when american brands inc. Pacman strategy the name comes from the video game. Pac man defense financial definition of pac man defense. There are pacman air fresheners, cereal boxes, flip phones, costumes, record books, and even a hot rod. With a pac man defense tactic, the hunter suddenly becomes the prey. Origin of pacman defense after pacman, trademark for a video game in which a character gobbles up its opponents. There is even an upright pacman machine on display at the smithsonian institution in washington, d. Origin of pac man defense after pac man, trademark for a video game in which a character gobbles up its opponents. In a pacman defense, the target firm then tries to acquire the company that has made the hostile takeover attempt.
In the next section, well weigh the costs and benefits of hostile takeovers. Hostile takeover dictionary definition hostile takeover. The bendix attempt to take control of martin marietta in 1982 gained considerable attention because of mariettas unusual countertakeover offer for bendix, called the pacman defense. In a pac man defense, the target firm then tries to acquire the company that has. It also describes the legal constraints and challenges that boards of directors face in adopting defensive measures that can stand up to judicial scrutiny while. Here are three examples of some of the biggest hostile takeovers of alltime and the strategies used by companies to gain the upper hand. Jun 08, 2016 what is a poison pill hostile takeover defense. He coined the term pacman defense in mergers and acquisitions that refers to a hostile takeover, after the pacman game that was originally. Jan 23, 1988 american brands offer for eii is the first time a strategy known as the pac man defense has been used since the martin mariettabendix takeover fight in 1982. Pac man defense strategy is used against hostile takeover situation by targeted company. Nov 26, 20 mens wearhouses pacman defense is a beloved tactic that first arose in the 1980s during the legendary martin mariettabendix battle. Connect the game of ice hockey where a flat ball is used and brucejay wasserstein who was an american investment banker, businessman, and writer and what do you arrive at. Pac man defense an antitakeover measure in which a target company attempts a hostile takeover of the acquiring company.
Target companies may choose to avoid a hostile takeover by buying stock in the prospective buyers company, thus attempting a takeover of their own. Hostile takeover dictionary definition hostile takeover defined. White knight is a strategic merger that does not involve a change of. Find appropriate target o bidder makes acquisition criteria o firms acquisition team and external advisors come up with suggestions, make short list o swot analysis of. Pacman is a targets tender offer for the acquirers shares. Apr 28, 2017 pacman strategy the name comes from the video game. It is a strategy in which the target company attempts to take control of the acquirer company before the acquirer company takes control of it. Quality of management industry status of target future technological and competitive. This would force the acquirer to defend itself and consequently may call off its proposal for takeover. Defenses against hostile takeovers bidder strategies steps before making an offer. Pac man defense free download as powerpoint presentation. Mens wearhouse dusts off the pacman defense the new york. Killer bees defense strategy top 5 antitakeover killer. A hostile takeover is the acquisition of one company called the target company by another called the acquirer that is accomplished by going directly to.
Indeed, the creativity of deal lawyers and bankers has added such terms as poison pill, shark repellent, pacman defense and white squire to the boardroom lexicon. A stratagem used to prevent a hostile takeover, by which the target company tries to acquire the bidder. The most famous example of a company using the pacman defense is also the origin of the term. Takeover strategies, competitive bidding, and defensive tactics. The pacman defense, named for a video game, seemed so drastic to. Hostile takeover defenses white knight and pac man. Takeover strategies, competitive bidding, and defensive.
While facing a hostile takeover through a hostile bid, the management of the targeted company acts to protect their independence or to ensure that the hostile bidder is pressured to sweeten their bid further. This takeover prevention strategy is implemented by the target. The pac man defense is a defensive business strategy used 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 wouldbe buyer. Despite the seemingly obvious advantages, takeover defenses of all kinds lately have become the target of increasingly potent shareholder activism. Brewer parries takeover bid, employing bold pacman. Other anti takeover defenses free online courses on mergers. Alternative acquisition defenses in some cases, a corporation may seek to acquire or be acquired in an alternative arrangement that thwarts the acquirers efforts. This strategy aims at the target company making a counter bid for the acquirer company. A takeover is considered hostile if the target companys board rejects the offer, and if the bidder continues to pursue it, or the bidder makes the offer directly after having announced its firm intention to make an offer. This is a very extreme type of anti takeover defense and usually signals desperation. Since schnatter was excluded from the dividend distribution, the strategy made a hostile takeover of the company unattractive as the potential acquirer would be made to pay twice the value per share of the firms common stock. Til the pacman defense is when a company being bought out.
The name refers to pac man, a video game in which the protagonist is at first chased around a maze of dots by 4 ghosts. Greenmail is a buyout by the target of its own shares from the hostile acquirer with a premium over the market price, which results in the acquirers agreement not to pursue obtaining control of the target in the near future. Further the pacman defense is an expensive strategy that may increase debts for the target company which in turn may result in losses or lower dividends in future years. Further work will be analyzed measures and tactics of defense against hostile takeovers, financing mergers and acquisitions and the mutual influence of funding and selected defense tactics on the value of the target company.
Pacman defense dictionary definition pacman defense defined. When reese group of hotels rgh was on the verge of facing a hostile takeover bid by rivals blossoms group which held a 14. The name refers to pacman, a video game in which the protagonist is at first chased around a maze of dots by 4 ghosts. Pacman defense pak man a defensive tactic against a hostile takeover in which the targeted company makes its own bid to take over the hostile firm. The purpose of adopting a takeover defense is to require a prospective purchaser to submit the necessary information to allow shareholders to make an appropriate decision and to secure time for the board of directors to consider counter measures and present alternatives on the premise that it is the shareholders, not the management, who. Since then, the pacman defense has occasionally been employed by the targets in hostile battles.
One very important issue about anti takeover defenses is valuations. Pac man defense example, strategy how pacman defense. What are some of the top hostile takeovers of alltime. His namesake has been adopted by the business world to describe a way to defend against a hostile takeover the defending company swallows up the larger company instead in a move known as the pacman defense. The pacman defense is a defensive tactic used by a targeted firm in a hostile takeover situation. White knight defense in some cases the board may go so. Chapter three offers a comparative analysis of the legal framework of. Killer bees defense strategy top 5 antitakeover killer bee. White knight business wikimili, the best wikipedia reader. The taxation of greenmail used to present a considerable obstacle for this defense. In 1982, bendix corporation tried to take over the aggregates and heavy building materials firm, martin marietta, by obtaining a controlling interest in martin marietta stock.
A smaller or equivalent firm may use this tactic to avoid a hostile takeover. Scribd is the worlds largest social reading and publishing site. The business term pacman defense in mergers and acquisitions refers to a hostile takeover target that attempts to reverse the situation and take over its wouldbe acquirer instead, a reference to pacman s power pellets. The pacman defense is a defensive business strategy used 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 wouldbe buyer. Stephen 2009 mergers and acquisitions in corporate law, 2nd edition, concept.
Pacman defense pacman defense the pacman defense is a strategy used by targeted companies to prevent a hostile takeover. Pacman defense hostile postoffer defense where the target makes counteroffer to acquire the acquirer much like when you eat the big white dot and all the ghosts turn blue and then you eat them. Pac man defense is a strategy to prevent hostile takeover to save one. This happens when a target company is quite larger than the predator the pacman defense is a drastic step because it often. A hostile takeover allows a bidder to take over a target company whose management is unwilling to agree to a merger or takeover. The pacman takeover defense is a beloved tactic that first arose in.
A target company thwarts a takeover by buying stock in the acquiring company, then launching a takeover. The pacman defense, named for a video game, seemed so drastic to wall street, in fact, that it was not tried again until this week, when american brands inc. The pacman defense is a strategy used by targeted companies to prevent a hostile takeover. Pacman strategy financial definition of pacman strategy.
In addition to state takeover legislation, the takeover environment of the 1980s spurred the development of a host of new antitakeover defenses to fend off hostile bidders. That is, an acquiring company attempts a hostile takeover, and, rather than submitting to the takeover, the target company attempts the same thing on the acquiring company. Much has been written, often in dramatic and ominous language, about hostile takeovers and the various steps companies take to prevent them. Other anti takeover defenses free online courses on. The second chapter introduces the most common anti takeover mechanisms, both proactive and reactive, and discusses the level of their effectiveness. Pacman defense dictionary definition pacman defense. The third reason for takeover defenses, managerial selfinterest, benefits the stockholders only if resistance happens by chance to be the appropriate action for one of the first two reasons. As a last resort, the target company can make a tender offer to acquire the stock of the hostile bidder. Turning the tables puts the original buyer in an unfavorable situation. Pownall, who popularized the pacman defense in business circles when he daringly used it to ward off a legendary 1982 hostile takeover of.
While most articles and books view such events from the perspective of investment bankers and corporate officers, little has been written about the impact of hostile takeovers on shareholders of target companies. Pac man defense fin avoiding purchase by making an offer to buy the prospective. As a counter strategy, the pacman defense works best when the companies are of similar size. One very important issue about antitakeover defenses is valuations. A takeover defense which includes issuing stock rights to existing shareholders so they may buy more stock at. In rare cases, a company decides that it would rather go out of business than be acquired, so they intentionally rack up enough debt to force bankruptcy.
The socalled pacman defense rarely has been used since the takeover wave of the mid. However, after eating a power pellet dot, he is able to chase and devour the ghosts. This is a very extreme type of antitakeover defense and usually signals desperation. Carr immediately put together a hostile takeover defense team, which. American brands offer for eii is the first time a strategy known as the pacman defense has been used since the martin mariettabendix takeover fight in 1982. The pacman defense is a hostile takeover defense tactic where the target company launches a takeover bid for the acquirer in an act of corporate self. This is risky because the target company could discover the attempted takeover and take steps to prevent it. A hostile takeover is the acquisition of one company called the target company by another called the acquirer that is accomplished by going directly to the companys. The business term pacman defense in mergers and acquisitions refers to a hostile takeover target that attempts to reverse the situation and take over its wouldbe acquirer instead, a reference to pacman s energizers. The defending company would instead swallow the larger. Ralcorp will not be an easy target because it has takeover defenses in place, but then the fact that the two companies have an overlapping investor base may lead to some investor pressure in favor of a deal. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Hostile takeover defenses white knight or pac man youtube. The second chapter introduces the most common antitakeover mechanisms, both proactive and reactive, and discusses the level of their effectiveness.
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