2009년 7월 29일 수요일

white night (gray night, white squire) in M&A

1. 자료: Dictionary of Business Terms, http://www.answers.com/topic/white-knight


Acquirer sought by the target of an unfriendly Takeover to rescue it from the unwanted bidder's control. The white knight strategy is an alternative to Shark Repellent tactics and is used to avert an extended or bitter fight for control.



In business, a white knight may be a corporation, a private company, or a person that intends to help another firm. There are many types of white knights. Alternatively, a gray knight is an acquiring company that enters a bid for a hostile takeover in addition to the target firm and first bidder, perceived as more favorable than the black knight (unfriendly bidder), but less favorable than the white knight (friendly bidder).

The first type, the white knight, refers to the friendly acquirer of a target firm in a hostile takeover attempt by another firm. The intention of the acquisition is to circumvent the takeover of the object of interest by a third, unfriendly entity, which is perceived to be less favorable. The knight might defeat the undesirable entity by offering a higher and more enticing bid, or strike a favorable deal with the management of the object of acquisition.

The second type refers to the acquirer of a struggling firm that may not necessarily be under threat by a hostile firm. The financial standing of the struggling firm could prevent any other entity being interested in an acquisition. The firm may already have huge debts to pay to its creditors, or worse, may already be bankrupt. In such a case, the knight, under huge risk, acquires the firm that is in crisis. After acquisition, the knight then rebuilds the firm, or integrates it into itself.

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White Squire

A white squire is similar to a white knight, except that it only exercises a significant minority stake, as opposed to a majority stake. A white squire doesn't have the intention, but rather serves as a figurehead in defense of a hostile takeover. The white squire may often also get special voting rights for their equity stake.

Hostile firm's strategies

  • The strategy that is usually employed by the Hostile Firm is making an offer more lucrative than the White Knights, so that the shareholders consider rejecting the White Knight's bid. This, however, can lead to bidding wars and finally to overpaying, by one or the other, for the target firm.
  • Another option is known as the NL strategy. Here, the hostile firm allows the white knight to move ahead and waits for the acquisition to take place. Once things are settled between the two entities, the Hostile Firm launches a takeover offer for the White Knight. This takeover offer is generally a hostile one. The target (firm being bid on) can enter into standstill agreements with the White Knight to prevent it from turning Gray Knight.

Examples of white knights

References

  1. ^ Cup Noodle white knight ups bid

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Learn More
White Squire (finance term)
Gray Knight (finance term)
Lady Macbeth Strategy (finance term)

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