Pac-Man Defense in Australia: 2025 Strategies Against Hostile Takeovers

When corporate predators come knocking, some Australian companies are flipping the script. Enter the Pac-Man Defense: a rare but headline-grabbing strategy that’s taking on new relevance in the 2025 mergers and acquisitions (M&A) scene. Named after the iconic video game, this defense turns the tables—making the hunter the hunted in the high-stakes world of hostile takeovers.

Understanding the Pac-Man Defense

The Pac-Man Defense isn’t your average anti-takeover tactic. Instead of passively resisting, the target company launches its own bid to acquire the would-be acquirer. It’s aggressive, risky, and can electrify the market.

• Mechanism: The target company makes a counter-offer to buy shares in the hostile bidder.

• Objective: Discourage the takeover by forcing the acquirer to defend itself, often driving up costs or deterring the original bid.

• Risks: Requires significant financial firepower and can backfire if the target overextends itself.

While rare in Australia, the Pac-Man Defense has seen renewed attention in 2025 due to a surge in cross-border M&A activity and a wave of opportunistic bids amid ongoing economic volatility.

2025: Why the Pac-Man Defense Is Back in Focus

This year, several factors are fueling interest in bold defensive strategies:

• Increased foreign interest: ASX-listed firms in energy, tech, and critical infrastructure are frequent takeover targets as international investors seek Australian assets.

• Regulatory changes: The Foreign Investment Review Board (FIRB) has updated its screening thresholds and review timelines, impacting the calculus for hostile bids.

• Shareholder activism: Large institutional investors are demanding stronger defenses against undervalued offers.

For example, in early 2025, a major Australian mining company faced an unsolicited bid from a US-based rival. Instead of simply rejecting the offer, the board launched its own counter-bid, acquiring a strategic stake in the acquirer. While the move stunned the market, it ultimately forced the bidder to negotiate on more favourable terms—or risk being swallowed themselves.

Real-World Examples and Legal Considerations

Although Australia has not seen as many Pac-Man scenarios as the US or UK, the tactic has made waves in high-profile cases. In the 1980s, US firm Bendix tried to take over Martin Marietta, only to find itself the target of a counter-bid. While not directly mirrored in Australia, the playbook is increasingly studied by boards facing aggressive suitors.

Australian law permits the Pac-Man Defense, but directors must tread carefully. The Corporations Act 2001 mandates that directors act in the best interests of the company. Any counter-bid must be justifiable to shareholders and regulators alike. The Takeovers Panel also scrutinizes tactics that could frustrate the acquisition process or harm minority shareholders.

Key legal updates in 2025:

• FIRB review: Counter-bids involving foreign acquirers now require explicit FIRB approval, adding time and complexity.

• Disclosure: Enhanced continuous disclosure obligations mean companies must promptly inform the market of any Pac-Man moves.

What Investors and Boards Need to Know

For investors, a Pac-Man Defense signals both risk and opportunity. It can lead to higher bid premiums, but also protracted battles that erode value. For boards, the tactic is a last resort—a nuclear option when all other defenses fail.

Considerations for 2025:

• War chest: Companies must ensure they have the financial resources to sustain a counter-bid, including access to debt or friendly investors.

• Communication: Transparent engagement with shareholders is crucial to maintain trust and avoid backlash.

• Alternatives: Traditional defenses—such as seeking a white knight or deploying poison pills—may offer less risky ways to fend off hostile suitors.

Ultimately, the Pac-Man Defense is a high-stakes gambit. It can secure independence or spark an all-out corporate brawl. As M&A heats up in 2025, expect to see more Australian boards at least considering this bold move—if only as a deterrent against opportunistic bids.