White Knight

Quick Facts

Origin: Chess terminology (the knight protects the king)

Typical premium: Higher than hostile bid to win shareholder approval

Famous example: Chevron rescuing Gulf Oil (1984)

A white knight is a friendly acquirer that rescues a target company from a hostile takeover by making a competing, board-approved offer. The white knight typically offers better terms or a more acceptable cultural fit than the hostile bidder.

The Chess Move

The term comes from chess, where the knight can leap over obstacles to protect the king. In M&A, the white knight "jumps" into a hostile situation to rescue a company from an unwanted suitor. It's one of the most dramatic moves in corporate dealmaking—and often the most expensive, since white knights typically pay a premium to outbid the hostile acquirer.

How It Works

Hostile bid threatens target company
Board seeks alternatives and identifies preferred buyer
White knight makes competing offer with board approval
Shareholders choose between hostile and friendly bids

White Knight vs. Black Knight

White Knight: Friendly acquirer welcomed by management
Black Knight: Hostile acquirer opposed by management
Gray Knight: Third party with unclear intentions

Famous Examples

Chevron rescues Gulf Oil from T. Boone Pickens (1984)

Pickens launched a hostile raid on Gulf Oil. Gulf's board preferred Chevron as a white knight. Chevron acquired Gulf for $13.2 billion—the largest merger at the time.

Warren Buffett rescues Wrigley (2008)

When Mars wanted to acquire Wrigley, Buffett provided $6.5 billion in financing, acting as a white knight to ensure the deal's success.

Risks

Overpayment: White knights often pay a premium to outbid the hostile acquirer
Shareholder skepticism: If the white knight's offer is worse, shareholders may reject it
Antitrust issues: The white knight may face regulatory hurdles

Why Shareholders Should Care

White knight deals are often good for shareholders—they trigger bidding wars that drive up the acquisition price. When Gulf Oil was in play, Chevron's winning bid was significantly higher than Pickens' original offer. The dynamic creates a rare situation where hostile bids, even unsuccessful ones, create value by attracting competing offers.

Alternatives

If a white knight can't be found, companies may use:

Poison pills
Pac-Man defense (reverse takeover)
Crown jewel defense (selling key assets)
Greenmail (buying back shares from the hostile bidder)

Practical Takeaways

For founders: If you're facing a hostile bid, start calling potential white knights immediately. The best time to build relationships with friendly acquirers is before you need them—not during a crisis.

For investors: A white knight entering the picture is usually good news—it means a bidding war is likely. Be patient and let the auction play out before tendering your shares.

Hostile Takeover — What prompts the search for a white knight
Tender Offer — The mechanism both hostile and friendly bidders use
Poison Pill — The defense that buys time to find a white knight
Greenmail — The controversial alternative to finding a buyer