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White Squire


Understanding the Role of White Squires in Corporate Takeovers

In the intricate world of corporate finance, strategies to thwart hostile takeovers are diverse and complex. One such strategy involves the intervention of what is known as a "white squire." Let's explore the concept of white squires, how they operate, and their significance in the realm of corporate defense mechanisms.

Deciphering White Squires: An Overview

A white squire is an entity, whether an investor or a friendly company, that strategically acquires a stake in a target company to obstruct a hostile takeover attempt. Unlike a white knight, which typically purchases the entire company to defend it, a white squire only acquires a partial stake. This partial ownership is strategically significant as it provides the target company with the necessary leverage to resist the takeover bid without relinquishing its independence entirely.

Unraveling the Modus Operandi of White Squires

White squires play a pivotal role in safeguarding the autonomy of target companies by thwarting hostile takeover attempts. By acquiring a strategic but partial stake in the target company, white squires effectively block the bidding entity, affording the target company crucial time to reassess its strategic options. Incentives offered to white squires may include discounted shares, substantial dividends, or even a seat on the target company's board, ensuring their alignment with the target company's interests.

Navigating Special Considerations with White Squires

Beyond financial incentives, white squires may also receive additional benefits, such as representation on the target company's board, cementing their allegiance to the target company's cause. To prevent potential conflicts of interest, agreements may be established requiring white squires to vote in favor of the target company's objectives. However, it's essential to acknowledge that while white squires can initially provide support, their partial control over the company may pose challenges in the long term. Standstill agreements may be enforced to restrict white squires from increasing their stake in the target company, mitigating potential risks associated with their partial ownership.

Illustrative Examples of White Squire Deployments

Instances of white squire interventions abound in corporate history. For instance, in 2013, America Movil's attempted acquisition of Dutch telecoms company KPN was thwarted by an independent foundation acting as a white squire. Moreover, notable entities like Disney and CBS have utilized white squires to fend off takeover attempts in the past. However, it's crucial to note that while white squires are intended to bolster the target company's defenses, their involvement may lead to unforeseen consequences, as evidenced by Loews Corp.'s pressure on CBS management following its stake acquisition.