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 a force deemed undesirable by company officials, otherwise known 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 middle of a hostile takeover. Often, company officials seek out a white knight – 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.

Billionaire Patrick Soon-Shiong has been deemed as a white knight for his $70.5 million investment in May 2016 into Tribune Publishing, a newspaper company that is currently fending off a takeover attempt by Gannett Co., the United States' largest newspaper company by daily circulation. Soon-Shiong's investment makes him Tribune Publishing's second-largest shareholder.

Hostile Takeovers

A few of the most hostile takeover situations include AOL's $164 billion purchase of Time Warner in 2000, Sanofi-Aventis' $24.5 billion purchase of biotech company Genzyme in 2010, Deutsche Borse AG's blocked $17 billion merger with NYSE Euronext in 2011 and Clorox's rejection of Carl Icahn's $11.7 billion takeover bid in 2011.

Successful hostile takeovers, however, are rare; not a single takeover of an unwilling target has amounted to more than $10 billion in value since 2000. Most of the time, an acquiring company raises the price per share it is offering 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 attempted to purchase Perrigo, the world's largest producer of drugstore-brand products, for $26 billion in 2015, but it was turned down. A company such as Perrigo does not need the help of a white knight when put into a hostile situation.

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

  1. Gray Knight

    A second, unsolicited bidder in a corporate takeover. A gray ...
  2. White Squire

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

    An attempt by a corporate raider or acquiring company to procure ...
  4. Takeover Bid

    A takeover bid is a corporate action in which an acquiring company ...
  5. Hostile Takeover

    A hostile takeover is the acquisition of one company by another ...
  6. Takeover

    A corporate action where an acquiring company makes a bid for ...
Related Articles
  1. Investing

    Bloodletting And Knights: Medieval Investment Terms

    From bloodletting to ye olde black knights, things on Wall Street are getting downright medieval!
  2. 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.
  3. Investing

    The Top 4 Nike Shareholders (NKE)

    Learn about the history of Nike Inc. and the top five individual shareholders who continue to benefit from the company's explosive success.
  4. 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.
  5. Investing

    Why Do Companies Care About Their Stock Prices?

    Find out how a company's stock price reflects its value to internal and external shareholders.
  6. Trading

    The Perils Of Program Trading

    The increasing use of program trading makes market glitches inevitable - and sometimes disastrous.
  7. Investing

    Whiting 3Q Loss, Revenue Below Estimates (WLL)

    Whiting Petroleum posted a 3Q loss on lower revenue, but its stock rallied despite the bad news.
  8. Insights

    The White House is Worth $400 Million

    The White House, which is currently worth $397.9 million, has appreciated 15% since 2009 when Obama first moved in.
  9. Investing

    Whiting Petroleum: Right Place, Right Time, Right Type

    Whiting's shortfall this quarter is a buying opportunity for aggressive investors.
  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. 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. 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 >>
  4. 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 >>
  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 >>
  6. How is a tender offer used by an individual, group or company seeking to purchase ...

    Learn how tender offers are used in takeover attempts, and understand the difference between a hostile takeover and a friendly ... Read Answer >>
Hot Definitions
  1. Standard Deviation

    A measure of the dispersion of a set of data from its mean, calculated as the square root of the variance. The more spread ...
  2. Entrepreneur

    An Entrepreneur is an individual who founds and runs a small business and assumes all the risk and reward of the venture. ...
  3. Money Market

    The money market is a segment of the financial market in which financial instruments with high liquidity and very short maturities ...
  4. Perfect Competition

    Pure or perfect competition is a theoretical market structure in which a number of criteria such as perfect information and ...
  5. Compound Interest

    Compound Interest is interest calculated on the initial principal and also on the accumulated interest of previous periods ...
  6. Income Statement

    A financial statement that measures a company's financial performance over a specific accounting period. Financial performance ...
Trading Center