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Hostile Takeover Defenses - White Knight and Pac Man

Alternative Defenses to a Hostile Takeover Bid

Written by Jason Gordon

Updated at September 23rd, 2021

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Table of Contents

What is a White Knight Defense?What is a Pac-Man Defense?Academic Research

What is a White Knight Defense?

In some cases the board may go so far as to endorse acquisition by a different acquirer. The endorsed acquirer does so to avoid the corporation falling into the hands of the original intended acquirer. This process is known as a white-knight defense to a hostile takeover.

Example: ABC Corp has a close relationship with 123 Corp. In order to fend off an acquirer, ABC Corp endorses a merger or acquisition by 123 Corp. This may make acquisition of shares too expensive and impractical for the acquirer.

Next Article: Alignment of Benefits & Corporate Governance Issues Back to: CORPORATE GOVERNANCE

What is a Pac-Man Defense?

The target corporation may seek to acquire the acquirer, if the acquirer is a public corporation with stock available for purchase. This is a sort of counter attack that may thwart the takeover effort.

Example: 123 Corp makes a tender offer for ABC Corp shares. ABC Corp board is not interested in combining with 123 Corp. They do, however, recognize that a combination could product substantial value. ABC Corp, in turn, makes a tender offer for 123 Corp stock. If this offer eclipses the expected increase in share value of 123 Corp after acquiring ABC Corp, then ABC Corp may be able to successfully fend off 123 Corps offer.

Related Concepts

  • Hostile Takeover
  • Power Struggles in Corporate Governance
  • Tender Offer
  • Proxy Contest
  • Incentivizing Acquirer Defense
  • Asset and Liability Defenses
  • Shark Repellant Defense
  • Poison Pill Defense
  • Gray Knight Defense
  • Macaroni Defense
  • Kamikaze Defense
  • Jonestown Defense

Academic Research



hostile takeover defenses

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