White Knight

Written By
Paul Tracy
Updated August 5, 2020

What is a White Knight?

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

How Does a White Knight Work?

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 Does a White Knight Matter?

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