Gray Knight

What Is a Gray Knight?

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

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

Albeit a gray knight might make an offer only for its own financial gain, it will in general be a lot more amicable than hostile takeover endeavors backed by black knights.

Grasping Gray Knights

Takeovers are a big part of the corporate world. Bigger companies frequently buy out more modest ones to extend their market, obtain new properties or innovations, get into a foreign country, or dispose of the opposition — for their own financial gain.

More modest companies that need to be acquired regularly put out a call for requested offers. This means they invite offers from different corporations. These takeovers are regularly friendly: The target firm comes to the arranging table with likely acquirers to sort out their deals.

More modest companies that would rather not be taken over become subject to hostile takeovers by elements that make unsolicited bids. These companies try to hold onto control of the target without getting endorsement from its board of directors. They might do this by buying shares in the target on the open market, trying to force a proxy fight, or giving a tender offer.

Securing companies can take on various forms and, along these lines, have various names. Unsolicited takeover endeavors are regularly driven by hostile parties known as black knights. A company might consider an offer by another party called a white knight. Thusly, the target might acknowledge the unsolicited offer by a white knight to forestall being taken over by a black knight. Yet, there's yet one more knight that may likewise get together to put in a bid.

Waiting for a deal to fail gives gray knights an advantage since they approach target firms with less-positive offers.

Gray knights sit tight for merger deals to get into issues or fail before they cross the end goal. Thusly, they cause a situation that puts the gray knight in a decent negotiating position with the expected target. They might outbid a white knight or make a less-positive offer, exploiting the way that the target company considers them to be a more amicable alternative to a hostile black knight. Yet, a gray knight may not necessarily uncover its true goals, which are much of the time just persuaded by its own financial requirements.

Gray Knight versus White Knight versus Black Knight versus Yellow Knight

A gray knight might enter a hostile takeover endeavor after black and white knights have previously put in their offers. As referenced over, a black knight is a party that starts a hostile takeover bid by trying to assume command over the target company. The target might try to start a line of defense, for example, a poison pill, golden parachute, or golden handshake to keep the black knight from finishing the acquisition.

A white knight is engaged with hostile takeovers however is generally viewed as a more amiable party than a black knight. Despite the fact that they probably shouldn't be assumed control over, target companies might work with white knights to keep black knights at bay. A white knight might work with its target to keep its core business together or to sort out more managable takeover terms between the two firms.

A yellow knight, then again, is an entity that was part of a hostile takeover deal yet chose to pull out for quite a few reasons. Generally, a yellow knight forsakes its takeover plans as a result of the cost associated with the deal. All things considered, it might choose to propose something different like a merger with the target on an equivalent level. In this way, a yellow knight is basically a hostile party that became friendly.

Features

• Gray knights are viewed as surrounding vultures since they trust that deals will fall through before diving in to arrange.
• A gray knight is a party that outbids a white knight in a takeover bid.
• Offers made by gray knights are frequently unsolicited.
• Albeit simply roused by their own financial gain, gray knights are generally viewed as a lot more amicable than hostile black knights.