In the context of mergers and acquisitions (M&A), a “white knight” refers to a friendly company or investor that comes to the aid of a target company that is under the threat of a hostile takeover by another firm. The white knight offers an alternative merger or acquisition proposal that is more favorable to the target company, often with terms that are more agreeable to its current management and shareholders.
The purpose of a white knight’s intervention is typically to preserve the target company’s corporate culture or strategic direction, which might be at risk under the control of the hostile bidder. By providing a more sympathetic offer, the white knight helps the target company avoid the potentially aggressive changes that the hostile takeover would impose.
Real-World Examples of White Knights
- Disney and Capital Cities/ABC (1996): Disney served as a white knight when it acquired Capital Cities/ABC, a deal that was friendly and supported by both companies’ management. This merger was viewed as a strategic fit, enhancing Disney’s media and entertainment portfolio.
- Air France and KLM (2004): When KLM was facing potential hostile bids and struggling financially, Air France stepped in as a white knight. The merger created one of the world’s largest airline groups, which was beneficial for both companies in terms of expanded global reach and operational synergies.
These examples illustrate how white knights can play a crucial role in the M&A landscape, helping target companies navigate challenging takeover threats while pursuing opportunities that align with their strategic goals.
