Posted in Finance, Accounting and Economics Terms, Total Reads: 782
Definition: Fat Man Strategy
This is a strategy which is taken by the directors of a company which may get acquired by another company as a defence tactic. This strategy makes the company unattractive for acquisition. This may include taking more leverage thereby adding more debt to their capital structure, acquiring another company or assets of another company and thus making it unattractive to take over.
The central idea of this strategy is to reduce the appeal to a hostile bidder by making the company bulkier- “fat man”. This is a form of “Kamikaze” defence tactic. ”Kamikaze” defence tactic is to make an irreversible damage on the company to prevent it from hostile take-over. Unlike other “kamikaze” defence tactics Fat Man Strategy involves asset accumulation rather than diversification. On the con side this strategy requires a lot of time to get implemented. So the target of the hostile bid needs to get detected well in advance.