The Pac-Man defense is a takeover resistance tactic in which the firm being pursued resists hostile takeovers by counter attacking the potential acquirer. The target firm tries to regain control of the strategic direction of the company by buying up a substantial number of its own shares using its own cash reserves or outside financing. Additionally, the target firm might sell off certain "strategic" assets like plants or land to make an impenetrable wall for the hostile acquiring company.

The idea behind the Pac-Man defense is to render the hostile takeover financially unsustainable. By gaining financial control of the situation, the target firm hopes to neutralize the hostile bid in its infancy to the delight of shareholders and other stakeholders. Such tactics serve to create a bidding war between the company trying to buy the target and other firms with the aim of paying out higher premiums to shareholders.

In some cases, the target company may be forced to use the Pac-Man defense because the acquiring firm's intentions are unclear. In other cases, the target company may deliberately initiate the Pac-Man defense to show shareholders that they not willing to be taken over without a fight.

Ultimately, the benefits of the Pac-Man defense are uncertain. The costs associated with the defensive strategy can be substantial and the result of a bidding war is unpredictable. On the one hand, a hostile acquirer may raise the price of its offer and spark a bidding war. On the other hand, a potential acquirer may decide to abandon its efforts if the target company successfully utilizes the Pac-Man defense. When utilized, the Pac-Man defense serves as an aggressive and oftentimes cost-intensive method for taking back control.