Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

White Knight

What it is:

A white knight is a company that acquires another company that is trying to avoid acquisition by a third party.

How it works (Example):

For example, let's assume that Company XYZ wants to acquire Company ABC. Company ABC feels that Company XYZ is a hostile bidder and will ruin the company. As a result, Company ABC's directors go on the offensive and tell the shareholders that a sale to Company XYZ would not be a good thing.

Company 123, which has worked with Company ABC for years and has a good relationship with its board, sees an opportunity to "save" Company ABC from the tense situation and make a lucrative acquisition at the same time. Company ABC welcomes Company 123's bid and merges with it to avoid acquisition by Company XYZ. Company 123 is a white knight.
 

Why it Matters:

White knights make acquisitions on friendly terms. White knights are white because they are associated with goodness and virtue.

Related Terms View All
  • Auction Market
    Though most of the trading is done via computer, auction markets can also be operated via...
  • Best Execution
    Let's assume you place an order to buy 100 shares of Company XYZ stock. The current quote...
  • Book-Entry Savings Bond
    Savings bonds are bonds issued by the U.S. government at face values ranging from $50 to...
  • Break-Even Point
    The basic idea behind break-even point is to calculate the point at which revenues begin...
  • Calendar Year
    If Company XYZ starts its fiscal year on January 1 and ends its fiscal year on December...