White knight

George Frederick Watts - Sir Galahad - 1943.209 - Fogg Museum

White knight refers to an individual or company that comes to the aid of another company that is facing a takeover or hostile acquisition from a third party. This term is widely used in the context of mergers and acquisitions (M&A) within the corporate finance and business strategy sectors. A white knight is considered a savior, stepping in to offer a more favorable deal or partnership to the company under siege, often preserving its corporate integrity or management's preferred direction. The concept is part of a larger narrative in the business world, where various strategies are employed to either defend against or facilitate corporate takeovers.

Overview

In a typical scenario, a company (often referred to as the "target") becomes vulnerable to a hostile takeover by another company (known as the "black knight") due to factors such as undervaluation, financial difficulties, or shareholder unrest. The white knight presents an alternative to the target company by proposing a merger or acquisition that is in better alignment with the target's current management's goals or offers better terms, thus saving the company from an unwanted takeover.

Strategies

White knights may employ several strategies to facilitate their intervention. These can include offering a higher purchase price for the shares of the target company, proposing a strategic partnership that provides mutual benefits without a full takeover, or collaborating with the target company's management to find alternative financing solutions to make the company less attractive or vulnerable to the hostile bidder.

Implications

The intervention of a white knight can have various implications for the target company. Positively, it can preserve the company's existing management and strategic direction, protect jobs, and ensure the continuation of the company's brand and culture. However, it can also lead to changes in corporate strategy, restructuring, or shifts in company culture, depending on the terms agreed upon with the white knight.

Examples

Historically, there have been numerous high-profile cases where white knights have played a crucial role in defending companies against hostile takeovers. These instances often involve large, well-known companies and can have significant impacts on the market, shareholder value, and the industry landscape.

See Also

• Mergers and Acquisitions
• Hostile Takeover
• Corporate Finance
• Business Strategy
• Black Knight (finance)
• Grey Knight (finance)