What is: White Knight

What is White Knight in Trading?

A White Knight in trading refers to a company or individual that comes to the rescue of another company facing a hostile takeover attempt. This term is often used in the context of mergers and acquisitions, where a White Knight steps in to offer a more favorable deal to the target company than the hostile bidder.

How Does a White Knight Work?

When a company is facing a hostile takeover, a White Knight may offer to acquire the target company at a higher price or under more favorable terms than the hostile bidder. This can help the target company fend off the hostile takeover attempt and retain control of its operations.

Benefits of a White Knight

One of the main benefits of a White Knight is that it can provide a more attractive alternative to the target company than the hostile bidder. This can help the target company protect its interests and maintain its independence in the face of a takeover attempt.

Role of White Knights in the Market

White Knights play a crucial role in the market by providing an alternative option for companies facing hostile takeovers. By offering a more favorable deal to the target company, White Knights can help maintain competition and prevent monopolies from forming.

White Knight vs. Hostile Bidder

While a White Knight seeks to help the target company fend off a hostile takeover, a hostile bidder is actively trying to acquire the target company against its will. The competition between White Knights and hostile bidders can lead to intense negotiations and bidding wars.

Examples of White Knight Scenarios

One famous example of a White Knight scenario is when Google stepped in to acquire Motorola Mobility in 2011, outbidding a hostile bidder. Another example is when Microsoft offered to acquire Yahoo in 2008 to prevent a hostile takeover by rival company.

Legal and Ethical Considerations

White Knight transactions can raise legal and ethical considerations, as they involve complex negotiations and potential conflicts of interest. Companies and individuals involved in White Knight scenarios must navigate these issues carefully to ensure compliance with regulations and ethical standards.

Impact of White Knights on Stock Prices

The involvement of a White Knight in a takeover scenario can have a significant impact on the stock prices of the companies involved. Investors often closely monitor White Knight developments to assess the potential outcomes and implications for their investments.

Conclusion

In conclusion, White Knights play a vital role in the world of trading by offering alternative options to companies facing hostile takeovers. Their involvement can help protect the interests of target companies and maintain competition in the market.