What is White Knight?
White Knight in Corporate Law
A White Knight is a friendly investor or company that comes to the rescue of a target company facing a hostile takeover. This investor helps the target company by buying its shares or providing financial support, allowing it to avoid being taken over by an unwanted acquirer.
Overview
In corporate law, a White Knight is an entity that provides assistance to a company that is being targeted for a hostile takeover. This assistance often comes in the form of buying shares or investing money, which can strengthen the target company’s position and make it less attractive to the hostile bidder. The White Knight's involvement is typically seen as a positive move, as it helps the target company maintain its independence and avoid unwanted changes in management or direction. The process of engaging a White Knight usually begins when a company receives an unsolicited offer from a hostile bidder. The target company may then seek out a friendly investor to step in and provide support. For example, in the 1980s, the American company Safeway was targeted by a hostile takeover but managed to secure a White Knight in the form of a larger grocery chain, which helped it fend off the takeover attempt and continue operating independently. White Knights are important in corporate law because they provide a strategic option for companies facing aggressive acquisition attempts. They can help preserve jobs, maintain company culture, and protect the interests of shareholders who may not want to sell their stakes in the company. By bringing in a White Knight, a company can strengthen its negotiating position and potentially deter hostile bidders from pursuing their takeover plans.