Definition
A white knight is a friendly third party invited by the target board to make a competing acquisition offer that is more attractive than a hostile bidder’s. The white knight is typically:
- Willing to pay a higher price
- Willing to commit to better terms (employment, location, brand preservation)
- Strategically aligned with the target’s existing management
Why it matters
The white knight is the preferred defensive response to a hostile bid: the company still gets sold, but on terms the board endorses, often at a higher price.
Risk
The hostile bidder may raise its own bid in response. Auctions between hostile bidders and white knights (e.g., RJR Nabisco, Time Warner) are textbook M&A history.
Distinction
A white squire takes a significant minority stake in the target — large enough to block a hostile bid but smaller than a full acquisition. Used when the target wants protection without being acquired.