Table of Contents

Gray Knight: What It Means and How It Works

By

Updated January 09, 2024

What Is a Gray Knight?

During a public corporate takeover or acquisition, a gray knight is a secondary, separate party to the first bidder and target company. The gray knight is a party that makes a higher offer than a white knight in a takeover attempt.

Gray knights generally make off🐲ers that are unsolicited after a takeover bid is made by a white knight. A white knight is a hostile takeover defense whereby a friendly individual or company acquires a corporation at fair consideration when it is on the verge of being taken over by an unfriendly bi൩dder or acquirer. The unfriendly bidder is generally known as the black knight.

Although a gray knight may make an offer purely for its own financial gain, it tends to be much friendlier than 澳洲幸运5开奖号码历史查询:hostile takeover attempts backed by black knights.

Key Takeaways

A gray knight is a party that outbids a white knight in a takeover bid.
Offers made by gray knights are often unsolicited.
Although purely motivated by their own financial gain, gray knights are generally considered much friendlier than hostile black knights.
Gray knights are seen as circling vultures because they wait for deals to fall through before swooping in to negotiate.

Understanding Gray Knights

澳洲幸运5开奖号码历史查询:Takeovers are a big part of the corporate world. Larger companies often buy out smaller on🎀es to expand their market, acquire new properties or technologies, get into a foreign country, or eliminate the competition—all for their own financial gain.

Smaller companies that want to be acquired normally put out a call for solicited offers. This means they welcome offers from other corporations. These takeovers are normally friendly: The 澳洲幸运5开奖号码历史查询:target firm comes to the negotiating tab🌊le with potential acquirers to w𝐆ork out their deals.

Smaller companies that don't want to be taken over become subject to hostile takeovers by entities that make 澳洲幸运5开奖号码历史查询:unsolicited bids. These companies try to seize control of the target without getting approval from their board of directors. They may do this by buying shares in the target on the open market, trying to force a 澳洲幸运5开奖号码历史查询:proxy fight, or issuing a 澳洲幸运5开奖号码历史查询:tender offer.

Acquiring companies can take on different forms and, therefore, have different names. Unsolicited takeover attempts are normally led by hostile parties known as 澳洲幸运5开奖号码历史查询:black knights. A company may consider an offer by another party called a white knight. By doing so, the t𒐪arget may accept the unsolicited offer by a white knight to prevent being taken over by a black knight. But there's yet another knight that may also come to the table to put in a bid.

Important

Waiting for a deal to fail gives gray knights 🅠an advantage because they approach target firms with l🍒ess favorable offers.

Gray knights wait for merger deals to get into problems or fail before they crosಞs the finish line. By doing so, they create a situation that puts the gray knight in a good negotiating position with th🀅e potential target.

They may outbid a white knight or make a less favorable offer, taking advantage of the fact that the target company sees them as a friendlier alternative to a hostile black knight. But a gray knight may not always reveal its tr🐎ue intentions, which are often only motivated by its own financial needs.

Gray ꦦKnight vs. White Knight vs. Black Knight vs. Yellow Knight

A gray knight may enter a hostile takeover attempt after black and white knights have already put in their offers. As mentioned above, a black knight is a party that initiates a hostile takeover bid by trying to take control of the target company. The target may try to initiate a line of defense such as a 澳洲幸运5开奖号码历史查询:poison pill, 澳洲幸运5开奖号码历史查询:golden parachute, or 澳洲幸运5开奖号码历史查询:golden handshake to preve🐲nt the black knight from coꦰmpleting the acquisition.

A white knight is involved in hostile takeovers but is generally seen as a friendlier pa𝔉rty than a black knight. Although they may not want to be taken over, target companies may work with white knights to keep black knights at bay. A white knight may work with its target to keep its core business together or to work out more amenable takeover terms between the two firms.

A 澳洲幸运5开奖号码历史查询:yellow knight, on the other hand, is an entity that was part of a hostile t🎶akeover deal but decided to back out for any number of reasons. For the most part, a yellow knight abandons its takeover plans because of the cost associated with the deal. Instead, it may decide to propose something else like a merger with the target on an 🌄equal level. Therefore, a yellow knight is essentially a hostile party that becomes friendly.

What Is a Hostile Takeover?

A hostile takeover is an unwanted acquisition attempt of a target company by an acquiring company. The acquiring company will seek ownership by slowly buying a controlling interest in the company, convincing its shareholders to allow the acquisition, or seeking to replace the target company's management. Often, the acquiring company will have a different vision for the target company than the target company's management.

How Do You Prevent Hostile Takeovers?

Companies can employ a variety of strategies to prevent a hostile takeover, such as a poison pill, white knight, crown-jewel defense, golden parachute, Pac-Man defense, and a s🔯tꦓock repurchase.

What Does "White Knight" Mean in Business?

In business, a "white knight" is a strategy to prevent a hostile takeover. When a target company is under threat of being acquired by an unfriendly company, it seeks to be acquired by a friendly company with similar goals and fair considerations, known as a "white knight."

The Bottom Line

Hostile takeovers are🍨 a reality in the business world. Many target companies tr🧸y to avoid hostile takeovers if they believe the company trying to buy them out will not be in the best interest of their company, the owners, the employees, and the vision the owners have for the company.

In these cases, target companies employ various strategies to prevent a hostile takeover, one being to employ a white knight, who, while will acquire the company nonetheless, is seen as a savior with similar interests. When a white knight doesn't work out, a gray knight may swoop in for its own financial interests.

澳洲幸运5开奖号码历史查询