White Squire - Explained
What is a White Squire?
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Table of ContentsWhat is a White Squire?What does a White Squire Do? Example of a White Squire DefenseAcademic Research on White Squire
What is a White Squire?
A white squire is an individual or a friendly firm that saves the target company from a hostile takeover by acquiring a stake in it. This approach is almost similar to that of the white knight pattern. Unlike the white knight, the target firm doesn't have to compromise with its independence or authority as the white squire just purchases a small portion of shares in the firm.
What does a White Squire Do?
A white squire refers to a friendly acquisition that doesn't have any interests of owning the firm. It ensures that it can block the bidding firm with its stake, and further, offer the target firm an option to review its plan. In return, the white squire may become a board member, receive shares at a discounted price, or get dividends. When the unfriendly acquirer or the black knight takes his bid back, the white squire will prefer selling its shares. For avoiding any switching related conflicts ahead, the target company can formulate the contract in such a manner that the shares of the white squire wont serve any purpose to the hostile bidding firm.
Example of a White Squire Defense
In 2013, America Movil tried to acquire the Dutch telecoms firm called KPN. And, then a white squire in the form of an independent firm tried to block America Movil in order to protect the interests of KPN.
Academic Research on White Squire
- The white squire defense: Evidence from private investments in public equity, Chen, S. S., Hsu, C. Y., & Huang, C. W. (2016). The white squire defense: Evidence from private investments in public equity. Journal of Banking & Finance, 64, 16-35.
- Board composition, ownership structure, and hostile takeovers, Shivdasani, A. (1993). Board composition, ownership structure, and hostile takeovers. Journal of accounting and economics, 16(1-3), 167-198.
- The role of defensive strategies and ownership structure of target firms: Evidence from UK hostile takeover bids, Sudarsanam, P. S. (1995). The role of defensive strategies and ownership structure of target firms: Evidence from UK hostile takeover bids. European Financial Management, 1(3), 223-240.
- The Poison Pill: A Panacea for the Hostile Corporate Takeover, Micheletto, R. C. (1987). The Poison Pill: A Panacea for the Hostile Corporate Takeover. J. Marshall L. Rev., 21, 107.
- Defensive strategies of target firms in UK contested takeovers, Sudarsanam, P. S. (1991). Defensive strategies of target firms in UK contested takeovers. Managerial Finance, 17(6), 47-56.[PDF]
- Hostile takeover defenses that maximize shareholder wealth, Pearce II, J. A., & Robinson Jr, R. B. (2004). Hostile takeover defenses that maximize shareholder wealth. Business Horizons, 47(5), 15-24.