What it is:
A Pac-Man defense is a strategy for averting hostile takeovers.
How it works (Example):
Let's assume Company ABC wants to purchase Company XYZ. Company XYZ's board does not want to sell, but Company ABC threatens a hostile takeover. To ward off the takeover attempt, Company XYZ makes an to buy Company ABC.
In the popular 1980s video game, Pac-Man is able to eat a power pellet that gives him the power to eat the ghosts that are chasing him.
Martin Mariettaintroduced the Pac-Man defense in 1982 by bidding for every company that was trying to buy it.