Hostile takeovers, defined as corporate mergers or acquisitions that are deemed unsolicited by the Board of directors and managers of the target company, could be deterred by numerous tactics, for example, a macaroni defense, a poison pill, or a golden parachute.
But those are merely a few examples of the colourful M&A vocabulary, where various knights come in different colours to describe the specifics of a potential hostile or friendly takeover.
First come the black knights, the raiders that are offering or executing hostile takeovers of publicly-traded companies (as usually the acquisitions of private companies are friendly).
As a rule, black knights target valuable companies, yet the end goal of their takeover attempt is to sell the target company off or break it up into different organisations, thus meeting a strong backlash from its management and shareholders.
And just like in the Arthur legends, the good hero comes in white, to save the threatened company by offering a way to avoid the hostile takeover with a friendly acquisition. Usually, the Board of the target company invites a friendly investor, known as a white knight, to outbid the hostile offer or to agree on a favourable deal with the management of the acquiring company, and on a change of control where typically the management is not replaced by the new Board and investors receive better terms for their shares.
The white knight may end up agreeing to acquire the majority or all of the target company, whereas an investor who has no intention to have a majority stake, is referred to as a white squire as serves as a figurehead in defence of a hostile takeover, rather than a main figure.
Takeover Knights – colours
A third potential takeover candidate might as well enter the battlefield, taking the middle position – to be less favourable than the white knight, yet much more desirable than the black knight raider – and, logically, coming out in a grey colour. As the term stems from American English, the candidate looking to take advantage of any problems between the first bidder and the target company, is known as a grey knight.
Sometimes, just like in fairy tales where a bad character eventually turns into a good guy, a black knight might back out of his hostile takeover attempt and instead, end up discussing a merger deal with the target company, either as a result of a change in strategy or an inability to meet the expanding cost of the initially planned hostile takeover resulting from the strategic defence plan of the targeted candidate. In such a scenario, the yellow colour does not come to describe the shining armour of the raider, but to rather stand as a metaphor for his cowardice and weakness.
