DEFINITION of 'Lady Macbeth Strategy'

Lady Macbeth strategy is a corporate takeover scheme in which a third party poses as a white knight to gain trust, but then turns around and joins with the unfriendly party in a hostile takeover bid. Behind the scenes the hostile bidder and supposed white knight to the target company will collude to achieve their aim of acquiring a company that is trying to resist the attempt. 

BREAKING DOWN 'Lady Macbeth Strategy'

Lady Macbeth, one of Shakespeare's most frightful and ambitious characters, devises a cunning plan for her husband, the Scottish general, to kill Duncan, the King of Scotland. The success of Lady Macbeth's scheme lies in her deceptive ability to appear noble and virtuous, and thereby secure Duncan's trust in the Macbeth's false loyalty.

The white knight defense is one of many takeover defenses that a company could deploy in a hostile bid situation. Adopting a poison pill (shareholder rights plan), staggering the election of the Board of Directors, establishing an employee stock ownership plan (ESOP) and creating a different class of voting shares are other common methods to deter or block unsolicited advances. If a company seeks out a white knight, it must treat this savior well, providing attractive incentives for his chivalry. For example, the white knight may be allowed to pay a smaller premium to take control of the company than otherwise would be required under competitive bid conditions.

Where is Lady Macbeth?

There is no good modern-day example of Lady Macbeth strategy. Hostile takeover bids occur only once in a while and it is rarer still that a white knight would become part of the plot. Moreover, even if a targeted company sought out a white knight, it typically would have enough knowledge of this third party to be confident that it would work cooperatively with the besieged company instead of betraying it.

  1. White Knight

    A white knight is an individual or company that acquires a corporation ...
  2. Gray Knight

    A second, unsolicited bidder in a corporate takeover. A gray ...
  3. Black Knight

    A black knight is a company that makes an unwelcome takeover ...
  4. Old Lady

    An eighteenth century nickname for the Bank of England. The full ...
  5. Bidder

    The bidder is the party offering to buy an asset from a seller ...
  6. Trust Company

    A trust company is a legal entity that acts as fiduciary, agent ...
Related Articles
  1. Investing

    Examining Stereotypes In Investing

    Irrespective of age, sex and other such factors, no normal investor wants an unsuitable investment. How much people really understand about their investments depends on various factors, including ...
  2. Insights

    U.S. Trucking Giants Swift and Knight to Merge: WSJ

    Swift Transportation and Knight Transportation are expected to combine through a share swap agreement
  3. Investing

    Establishing a revocable living trust

    This arrangement allows you to have more control over your estate — both before and after your death.
  4. Financial Advisor

    Irrevocable Trusts: New Trends You Need to Know

    Several improvements and additional provisions have been added to irrevocable trusts in recent years making them considerably more versatile than before.
  5. Personal Finance

    Rising Mortgage Rates Shut 1.4M Out of Refinance Market: Black Knight

    With mortgage rates rising, more than 1 million people in the U.S. would no longer benefit from refinancing their home loan.
  6. Investing

    What Happens to Scotland and Wales After Brexit?

    A possible Brexit from the EU could put Scottish independence back on the table after 2016, and may even compromise the entire unity of the UK.
  7. Managing Wealth

    Surprising Uses for Trust Funds

    Here are five common situations where a trust fund makes financial sense.
  8. Financial Advisor

    Advisors: Tips for When to Employ Living Trusts

    Revocable living trusts accomplish estate planning objectives that aren't possible with a will. Here are some of the cases that show when to use a trust.
  9. Personal Finance

    How to Become a Financially Savvy Bag Lady

    Organize your financial baggage for a better future.
  10. Managing Wealth

    Pick the Perfect Trust

    Trusts are an estate plan's anchor, but the terminology can be confusing. We cut through the clutter.
Hot Definitions
  1. Working Capital

    Working capital, also known as net working capital is a measure of a company's liquidity and operational efficiency.
  2. Bond

    A bond is a fixed income investment in which an investor loans money to an entity (corporate or governmental) that borrows ...
  3. Compound Annual Growth Rate - CAGR

    The Compound Annual Growth Rate (CAGR) is the mean annual growth rate of an investment over a specified period of time longer ...
  4. Net Present Value - NPV

    Net Present Value (NPV) is the difference between the present value of cash inflows and the present value of cash outflows ...
  5. Price-Earnings Ratio - P/E Ratio

    The Price-to-Earnings Ratio or P/E ratio is a ratio for valuing a company that measures its current share price relative ...
  6. Internal Rate of Return - IRR

    Internal Rate of Return (IRR) is a metric used in capital budgeting to estimate the profitability of potential investments.
Trading Center