White Knight

What is a 'White Knight'

A white knight is an individual or company that acquires a corporation on the verge of being taken over by forces deemed undesirable by company officials (sometimes referred to as a "black knight"). While the target company doesn't remain independent, a white knight is viewed as a preferred option to the hostile company completing their takeover. Unlike a hostile takeover, current management typically remains in place in a white knight scenario, and investors receive better compensation for their shares.

BREAKING DOWN 'White Knight'

The white knight is the "savior" of a company in the midst of a hostile takeover. Often a white knight is sought out by company officials - sometimes to preserve the company's core business and other times just to negotiate better takeover terms. An example of the former can be seen in the movie "Pretty Woman" when corporate raider/black knight Edward Lewis (played by Richard Gere) has a change of heart and decides to work with the head of a company he'd originally planned on ransacking.


In addition to white knights and black knights, there is a third potential takeover candidate called a gray knight. As one might guess, a gray knight is not as desirable as a white knight, but more desirable than a black knight.

RELATED TERMS
  1. Black Knight

    A company that makes a hostile takeover offer for a target company. ...
  2. Yellow Knight

    A company that was once making a takeover attempt but ends up ...
  3. Gray Knight

    A second, unsolicited bidder in a corporate takeover. A gray ...
  4. Lock-Up Option

    A stock option offered by a target company to a white knight ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a ...
  6. Premium Raid

    An attempt by a corporate raider or acquiring company to procure ...
Related Articles
  1. Investing Basics

    Warding Off Hostile Takeovers

    The purpose of this article is to provide a general overview of hostile corporate takeovers, while highlighting a general course of action against such activity. This article provides basic information ...
  2. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  3. Options & Futures

    Mergers and Acquisitions: Doing The Deal

    Start with an Offer When the CEO and top managers of a company decide that they want to do a merger or acquisition, they start with a tender offer. The process typically begins with the acquiring ...
  4. Investing Basics

    What is a Takeover?

    A takeover happens when one company makes a bid to acquire a target company.
  5. Options & Futures

    Pinpoint Takeovers First

    Use these seven steps to discover a takeover before the rest of the market catches on.
  6. Investing

    Hostile Takeover

    A hostile takeovers is an unfriendly acquisition attempt by a company or raider that is strongly resisted by the management and the board of directors of the target firm. Learn more about the ...
  7. Fundamental Analysis

    Reverse Takeover

    Learn more about this type of takeover and how companies use it to avoid IPOs.
  8. Investing News

    The Great Southwest Railroad Strike of 1886

    The Great Southwest Railroad Strike, which spanned across Arkansas, Illinois, Kansas, Missouri and Texas, took place from March to September 1886. It included some 200,000 strikers. At the time, ...
  9. Real Estate

    Ultra-Luxury Real Estate: What's Hot, What's Not

    And is this a good time to buy? Here's the 2016 forecast for luxury residences in seven global markets, from Shanghai to London to New York City.
  10. Your Clients

    How Black Millennials Are Closing the Wealth Gap

    African American Millennials are setting up their future children and grandchildren to succeed. Here's how.
RELATED FAQS
  1. What did Knight Trading Group do to incur a $1.5 million fine for violating trading ...

    The dotcom boom accelerated many deceitful business practices that first became apparent during the '80s and '90s. Many of ... Read Answer >>
  2. How can a company resist a hostile takeover?

    Learn about some of the defense strategies a public company's board of directors might employ to prevent a hostile bidder ... Read Answer >>
  3. Under what circumstances might a company decide to do a hostile takeover?

    Learn about why companies use a hostile takeover to gain control of another company, and understand the different methods ... Read Answer >>
  4. What's the difference between a merger and a hostile takeover?

    Understand the difference between a merger and a hostile takeover, including the different ways one company can acquire another, ... Read Answer >>
  5. What is the difference between a hostile takeover and a friendly takeover?

    Learn about the difference between a hostile takeover and a friendly takeover, and understand how proxy fights and tender ... Read Answer >>
  6. What happens to the shares of a company that has been the object of a hostile takeover?

    Learn about the effect on the share price of companies that are targets of hostile takeovers, which are tactics used by famed ... Read Answer >>
Hot Definitions
  1. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  2. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  3. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
  4. Generally Accepted Accounting Principles - GAAP

    The common set of accounting principles, standards and procedures that companies use to compile their financial statements. ...
  5. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  6. Call Option

    An agreement that gives an investor the right (but not the obligation) to buy a stock, bond, commodity, or other instrument ...
Trading Center