CNBC Explains

CNBC Explains: The 'Pac-Man Defense'

The Pac-Man defense.
Emmanuelle Dunand | AFP | Getty Images

Imagine some poor little company being chased around a maze by a relentless predator—say, a ghost—then gobbling up a power pellet and inhaling its enemy.

If you've seen this chase before, whether at an arcade or on your home game console, then you can have an idea about what corporate America calls the "Pac-Man Defense."

Named after the ever-popular video game, the strategy is believed to have its roots in 1982, when Martin Marietta turned the tables on Bendix. Martin Marietta borrowed $1 billion to buy up Bendix stock, thwarting the takeover bid, causing Bendix to be acquired by Allied, and nearly slicing its own jugular in the process through the onerous levels of debt it acquired.

That very danger—of mutually assured destruction, as they used to call it in the Cold War—is the main reason the Pac-Man Defense doesn't rear its head very often.

Most recently, Men's Wearhouse attempted to use the move to thwart a buyout from Jos. A Bank.