Pyrrhic Victory

What Is a Pyrrhic Victory?

Pyrrhic victory is a victory or success that comes at the expense of great losses or costs. In business, examples of such a victory could include succeeding at a hostile takeover bid or winning a lengthy and expensive lawsuit.

Understanding a Pyrrhic Victory

The expression "Pyrrhic victory" alludes to King Pyrrhus of ancient Greece. After King Pyrrhus's army suffered many casualties in defeating the Romans in battle, he reportedly said, "If we win another such battle against the Romans, we will be completely lost." A Pyrrhic victory occurs when the toll taken on the "winning" party does not offset the benefit of success.

Pyrrhic victories, in the business world, often occur in the courtroom when a judge rules in favor of one side, but the cost of bringing the case to court far exceeds the monetary rewards for the winner. This situation may occur when a smaller business is bringing a lawsuit against a larger company with more funds and a legal team at their disposal. Even if the smaller business wins, it may suffer greater damages due to the expenses of a lengthy lawsuit.

A Pyrrhic victory may also occur if the buyout price to execute a hostile takeover is escalated during negotiations or when an acquired company does not live up to the acquiring company's anticipated returns.

Example of a Pyrrhic Victory in the Courtroom

In 2001, Microsoft won a Pyrrhic victory in its antitrust case when an appeals court decided that the software giant was not to be broken up. However, as a result of the case, Microsoft was deemed a monopoly, and as such, it was subject to more intense regulations going forward.

In 2011, Hank Greenberg, formerly the CEO of American International Group (AIG), filed a lawsuit against the U.S. government alleging that the terms of the government's bailout of his insurance company were harsher than those imposed on other financial institutions after the financial crisis of 2007-2008. After four years, during which Greenberg is estimated to have spent millions of dollars on legal fees, the judge agreed with Greenberg's premise but did not award any monetary compensation. While the court found the terms of AIG's bailout were more stringent than those placed on other financial institutions, the judge stated that, without the bailout, the insurance company would have been shut down. The result was that Greenberg spent millions, got the Pyrrhic victory, and walked away without any monetary compensation.

Example of a Pyrrhic Victory in a Hostile Takeover

In 2002, AOL took over Time Warner in a hostile takeover valued at over $160 billion. The acquisition was hailed by AOL as the deal of the millennium. Shortly after the deal closed, however, the tech bubble burst, and the new, combined company AOL Time Warner lost $200 billion in its market capitalization over the next two years.

Revenues were also squeezed by the rise of broadband internet, which delivered far better performance than AOL's dial-up services. After years of trying to synchronize the operations of the two distinctly different companies, Time Warner spun off its AOL holdings in 2009, ending what is considered to be one of the least successful mergers of all time.