Legal Definitions - white knight

A white knight refers to an individual or, more commonly, a corporation that comes to the aid of a company facing an unwanted or "hostile" takeover attempt. This "rescue" typically involves the white knight making a superior and more appealing offer to acquire the target company, thereby preventing the hostile bidder from succeeding. The target company's management usually welcomes the white knight's offer because it aligns better with their strategic vision or offers more favorable terms for shareholders and employees.

• Example 1: Tech Industry Rescue

  Scenario: "InnovateTech," a promising startup known for its unique software, becomes the target of a hostile takeover bid from "MegaCorp," a larger competitor with a history of acquiring smaller companies only to absorb their technology and lay off staff. InnovateTech's founders and board are strongly against this acquisition, fearing the loss of their company's culture and innovation.

  White Knight Action: "Visionary Ventures," another well-respected tech firm known for fostering innovation and allowing acquired companies to operate with significant autonomy, steps in with a counter-offer. Visionary Ventures proposes a merger that promises to preserve InnovateTech's culture and leadership, offering a higher price per share and a clear path for continued product development.

  Explanation: Visionary Ventures acts as the white knight because it intervenes with a friendly, more attractive offer to save InnovateTech from an unwanted takeover by MegaCorp, which was perceived as a threat to InnovateTech's identity and employees.

• Example 2: Manufacturing Sector Defense

  Scenario: "Heritage Mills," a long-standing textile manufacturer with a strong community presence, receives a hostile tender offer from "Asset Strippers Inc.," a private equity firm notorious for buying companies, selling off their assets, and closing operations to maximize short-term profit. Heritage Mills' management and the local community are distressed by this prospect, fearing job losses and the destruction of a historic brand.

  White Knight Action: "Global Textiles Group," a larger, stable industry player with a commitment to long-term growth and employee welfare, makes a competing bid. Global Textiles Group offers to acquire Heritage Mills at a premium, promising to invest in its modernization, retain its workforce, and maintain its brand identity.

  Explanation: Global Textiles Group is the white knight here, stepping in to protect Heritage Mills from a hostile acquirer (Asset Strippers Inc.) whose intentions were seen as detrimental to the company's future and its stakeholders, by offering a more beneficial and welcomed acquisition proposal.