What is 'White Knight'

A white knight is an individual or company that acquires a corporation on the verge of being taken over by an unfriendly bidder/acquirer, otherwise known as a black knight. Although the target company does not remain independent, acquisition by a white knight is still preferred to a hostile 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 subject to a hostile takeover. Often, company officials seek out a white knight to preserve the company's core business or 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, had a change of heart and decided to work with the head of a company he'd originally planned to ransack.

Some notable examples of white knight rescues are United Paramount Theaters 1953 acquisition of the nearly bankrupt ABC, Bayer's 2006 white knight rescue of Schering from Merck KGaA, and JPMorgan Chase's 2008 acquisition of Bear Stearns that prevented their insolvency.

Hostile Takeovers

A few of the most hostile takeover situations include AOL's $162 billion purchase of Time Warner in 2000, Sanofi-Aventis' $20.1 billion purchase of biotech company Genzyme in 2010, Deutsche Boerse AG's blocked $17 billion merger with NYSE Euronext in 2011, and Clorox's rejection of Carl Icahn's $10.2 billion takeover bid in 2011.

Successful hostile takeovers, however, are rare; no takeover of an unwilling target has amounted to more than $10 billion in value since 2000. Mostly, an acquiring company raises its price per share until shareholders and board members of the targeted company are satisfied. It is especially hard to purchase a large company that does not want to be sold. Mylan, a global leader in generic drugs, experienced this when it unsuccessfully attempted to purchase Perrigo, the world's largest producer of drugstore-brand products, for $26 billion in 2015. 

In addition to white knights and black knights, there is a third potential takeover candidate called a gray knight. A gray/grey knight is not as desirable as a white knight, but it is more desirable than a black knight.  The gray knight is the third potential bidder in a hostile takeover who outbids the white knight.  Although friendlier than a black knight, the gray knight still seeks to serve its own interests. Similar to the white knight, a white squire is an individual or company that only exercises a minority stake to aide a struggling company.  This aide provides the company with enough capital to improve its situation while allowing the current owners to maintain control.

  1. Gray Knight

    A gray knight is a friendlier alternative to a hostile black ...
  2. Yellow Knight

    A yellow knight is a company that was making a hostile takeover attempt, ...
  3. Killer Bees

    Killer bees helped companies avoid takeovers, during the 198 ...
  4. Takeover

    A takeover occurs when an acquiring company makes a bid in an ...
  5. Pac-Man

    Pac-Man is a hostile takeover defense tactic in which a target ...
  6. Anti-Takeover Measure

    In order to block hostile bids for control of a company, the ...
Related Articles
  1. 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.
  2. Small Business

    Corporate Takeover Defense: A Shareholder's Perspective

    Find out the strategies corporations use to protect themselves from unwanted acquisitions.
  3. Personal Finance

    Refis Account for Smallest Portion of Mortgage Market in 20 Years

    Refinancing of existing mortgages is at its lowest rate in twenty years thanks to rising interest rates.
  4. Investing

    Former FB Exec: Regulation Would Favor Tech Giants

    A tech executive sees new regulation as most likely to entrench Facebook, Amazon and Alphabet.
  5. Investing

    Trademarks of a Takeover Target

    These tips on finding viable takeover targets can lead you to little companies with big prospects.
  6. Investing

    Why Do Companies Care About Their Stock Prices?

    A company's stock price reflects the company's earnings potential, its future viability, determines management compensation can play a critical role in mergers and acquisitions.
  7. Managing Wealth

    Which Collectibles Are Worth the Most?

    Classic cars, fine art, jewelry and more can be safe havens to invest funds. Find out which asset classes performed best in 2015.
  8. Investing

    Whiting Petroleum 4Q Shows Investment in Future

    Whiting posted a 4Q loss, but ambitious debt and capex programs the pave way for a better future.
  9. Investing

    Take A Bite Out Of Counsel Corporation

    Some micro caps, such as Counsel, fly under the radar but offer the potential for big returns.
  10. Small Business

    How To Profit From Mergers And Acquisitions Through Arbitrage

    Making a windfall from a stock that attracts a takeover bid is an alluring proposition. But be warned – benefiting from m&a is easier said than done.
  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. 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 >>
  3. How can a company buy back shares to fend off a hostile takeover?

    Learn about why a business might use a stock buyback to thwart a hostile takeover attempt by reducing its total assets and ... Read Answer >>
  4. What are some of the top hostile takeovers of all-time?

    Learn about some of the most noteworthy hostile takeovers in history, including the KKR acquisition of RJR Nabisco and the ... Read Answer >>
  5. What is a staggered board?

    A staggered board of directors (also known as a classified board) is a board that is made up of different classes of directors. ... Read Answer >>
Trading Center