Yellow Knight

DEFINITION of 'Yellow Knight'

A company that was once making a takeover attempt but ends up discussing a merger with the target company. Yellow knights have various reasons for backing out of the takeover attempt, but frequently are attributable to the target company's ability to fend off takeover. The "yellow" in "yellow knight" may refer to the color's association with cowardice. Since a yellow knight backs down from a takeover attempt and retreats to merger discussions, a yellow knight may be viewed as weak.

BREAKING DOWN 'Yellow Knight'

In mergers and acquisitions (M&A), various colored knights are used to identify the nature of a takeover or potential takeover. A black knight is a company that makes a hostile takeover offer for the target company. A white knight makes a friendly takeover offer to a target company that is being faced with a hostile takeover. A gray knight (sometimes spelled grey knight) is a second unsolicited bidder in a corporate takeover.

RELATED TERMS
  1. Black Knight

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

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  3. Gray Knight

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RELATED FAQS
  1. 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 >>
  2. What is the difference between an acquisition and a takeover?

    There is no tangible difference between an acquisition and a takeover; both words can be used interchangeably - the only ... Read Answer >>
  3. What did Knight Trading Group do to incur a $1.5 million fine for violating trading ...

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  4. How can a company buy back shares to fend off a hostile takeover?

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  5. What happens to the shares of a company that has been the object of a hostile takeover?

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  6. What is the difference between a merger and a takeover?

    In a general sense, mergers and takeovers (or acquisitions) are very similar corporate actions - they combine two previously ... Read Answer >>
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