how a white knight works
takeovers can be friendly or uninvited when the acquiring company tries to assume control of another with the consent of the target s board of directors the takeover is considered hostile the acquiring company may use certain strategies to try to gain control but the target also has a few tricks it can use to prevent a takeover the white knight strategy is one defense officials from the target firm may seek out a white knight to preserve the company s core business or to negotiate better takeover terms the strategy is named so because a white knight is commonly seen as a savior the white knight is a third party that offers to buy the target firm with its approval here s how it works another key facet of this strategy is that the white knight may also choose to keep the target s business operations as is after the deal goes through the terms white knight and black knight can find their origin in the adversarial game of chess while a white knight is considered a savior a black knight is akin to an adversary special considerationsa few of the most hostile takeover situations include however successful hostile takeovers are rare no takeover of an unwilling target has amounted to more than 10 billion in value since 2000 an acquiring company primarily 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 5white knight vs other knightsin addition to white knights there are other so called knights in the business world the most common ones are a black knight is a party that initiates a hostile takeover bid by trying to take control of the target company the target may try to initiate a line of defense such as a poison pill golden parachute or golden handshake to prevent the black knight from completing the acquisition richard gere s character in the film pretty woman was considered a black knight corporate raider edward lews had a change of heart and decided to work with the head of a company he originally planned to ransack white knight vs white squiresimilar to a white knight a white squire is an investor or friendly company that buys a stake in a target company to prevent a hostile takeover but unlike the white knight the target firm does not have to give up its independence because the white squire only buys a partial share of the company rather than a controlling interest the white squire s stake is large enough to prevent the acquirer from taking over the target in exchange for taking this action the white squire may be offered discounted shares or even a seat on the company s board some white squires may sell their stake in the company after the hostile takeover fails and the acquirer backs off examples of white knightssome 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 complete insolvency 