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Paul Tracy

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Prior to starting InvestingAnswers, Paul founded and managed one of the most influential investment research firms in America, with more than 2 million monthly readers. While there, Paul authored and edited thousands of financial research briefs, was published on Nasdaq. com, Yahoo Finance, and dozens of other prominent media outlets, and appeared as a guest expert at prominent radio shows and i...

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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.

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