A deal-ending friction penalty incurred by a party for withdrawing from an agreement, intended to serve as a deterrent by inflicting significant financial harm.
That is, the seller wants the deal to happen, so the buyer pays a big fee if it doesn’t.
Why might this happen? Like...Shmoogle (a behemoth) wants to buy Shmeikle (a tiny company). Both are in the same industry, but Shmeikle is worried that the Justice Department might outlaw the sale based on Sherman Act/anti-monopoly/anti-trust rules. Having “sold out to The Man,” Shmeikle’s business would have been harmed, as its distribution network of hippies would have all viewed the company differently...than the hippie hipster image it held before selling out. So they needed to have enough cash from Shmoogle to make up for the damage.
See also: Alimony. The ironically named “Two Girls, One Shuck Co.” is an oyster catering company that employs hundreds of women serving thousands of bi-valves each year. In an effort to diversify, the company enters an agreement to purchase Mike’s Mussels, Inc.
The girls’ lawyer, Dr. Ernie “Big E” Ville, insists on including a provision with a breakup fee of one million dollars to dissuade Mike from wasting their time by looking around for a more attractive suitor.
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Finance: What is a Pac Man Defense?21 Views
Finance a la shmoop what is a pacman defense?
[Pacman eating] yeah well wacka wacka to you too...Hostile takeovers are rare in real life not so
rare in pac-man but when they do happen there exists a whole cadre of strategies
behind defending them at least from the company's perspective being taken over
there and pac-man defense is inarguably the best named strategy of all of
them in essence what happens when we'll say an angry competitor let's call him
blinky Inc tries to buy an angrier competitor let's call them inky inc.
well blinky would be buying shares of inky in the open marketplace filing to [Blinky and inky appear]
go past 15% ownership and eventually own enough shares to elect its own Board of
Directors and make a takeover happen well in a Pac Man defense as blinky is
snarfing up shares of inky, inky buys shares of blinky sort of turning the
tables you know like this and while you're gobbling up that competition and [Pacman gobbling competition]
don't forget to eat a bunch of cherries or a strawberry every once in a while
because you know you still need your fruits and veggies
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