White Knight

A white knight is a friendly buyer that enters as an alternative to a hostile takeover bid. The target's management supports its involvement because it prefers the offer or the bidder's plans for the business. A successful white knight nevertheless also takes control, so the role does not guarantee the target lasting independence.

In practice, management seeks a bidder able to present a financially or strategically more attractive proposal. Beyond price, relevant factors include funding certainty, the likelihood of completion and plans for sites, employees, the brand and business development. Commitments should be examined for their enforceability and duration. Describing a buyer as friendly says little by itself about the decisions it will make after taking ownership.

An additional bidder can increase competition and improve shareholders' negotiating position, but a higher price is not guaranteed. Shareholders also need to compare the form of consideration, offer conditions and expected timetable. Nor should management favour an alternative solely because it protects its own position.

The white knight often faces the challenge of entering an ongoing process late. It must assess information, arrange financing and submit a credible offer under time pressure. Cooperation from the target can help. However, information sharing, arrangements with major shareholders and support from management must fit the legal framework governing the takeover. In Germany, seeking a competing offer is generally permitted.

The buyer still needs an independent investment case: does the target fit its strategy, do the expected benefits justify the price, and can it deliver its commitments? A buyer focused mainly on outbidding a rival risks exceeding the economic limits of its own proposal. Competitive pressure therefore does not replace due diligence or disciplined valuation. Management support may facilitate the process, but it cannot substitute for a sustainable acquisition rationale.