White Knight Offer

Posted in Operations and Supply Chain Terms, Total Reads: 867
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Definition: White Knight Offer

It is a bid or an offer given to a company which is under a threat of a hostile takeover .the company being taken over  due to  non payment of debt or on the verge of bankruptcy. The hostile company is termed as a black knight . However the rescuer in this case is the white knight.  The white knight is seen as a savior who  seems to be going  for a gentle takeover.

It can be an individual or a group who offer a favorable proposition of  retaining the same employees  and equally well compensating .  The white knight  acts as a savior by

  • Acquiring the minority of share holding rights  which can  prevent their rival from having a power in their decision making
  • Transferring profits from their parent firm to  help in resurrecting the weaker firm

However there is not always a good intention of taking over as

 

  • During a takeover the firm is also taking a prevailing debt on itself. It needs to generate the  profits for all the investment it has  put in .
  • It  also has to do with providing enough capital to their clients which the previous firm failed to  provide . Hence providing the necessary  momentum in  churning  the static economy.
  • They look for the opportunity of  stripping of a rival which could have been  a threat during its flourishing period.

 

Example:

Bank  of America  acted as a savior for acquiring countrywide  financial.

  • Although with debt levels of 1000 million dollars the risk was seen to be very high but  it also gave the opportunity of  stripping of a rival which could have been  a threat during a healthy period.

 

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