What is White Knight?

How does it work?

When a company becomes a target for a hostile takeover, then the company needs to be saved by somebody who would help the company grow. At this point, the concept of the white knight comes into existence.

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Examples of White Knights

How can the target company save itself by finding a white knight?

source: moneycontrol.com

Since the year 2000, it found that whenever there was a hostile takeover, it didn’t amplify its value. The unwilling target company, which was taken over by force, couldn’t amount to more than $10 billion.

So, we can easily state that no hostile takeover was ever successful. Every company, thus, whenever they become a target for a hostile takeover, needs to make a great effort to find out a white knight.

Otherwise, the near future of the target company would be the following –

  • There would be no independence/autonomy in the company. And as a result, the company will lose its way, and they need to adhere to the whims of a black knight.Secondly, the company would lose its vision, values, and future.Thirdly, the company wouldn’t create value for its employees, customers, and stakeholders.

For a business, this is the worst scenario. And that’s why it’s important to find someone who would take over the company in preferred terms (even when there won’t be full autonomy). In a few cases, it also acts as a savior for companies that will be bankrupt.

But, every target company doesn’t need such a savior. If the target company is way bigger or one of the largest companies in the industry, they need a knight even when they face a chance of a hostile takeover.

This has been a guide to White Knight, its definition, and practical examples. We also discuss how a company can save itself by finding a white knight. You may also learn more from these articles below –

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