Yellow Knight
A yellow knight is the name of a certain firm that was creating a situation of a rather hostile takeover for some time, but later reviewed this idea and eventually decided to merge several equal companies together with the target one. One way or another, the yellow knight is essentially a hostile side that has become friendly.
What is a Yellow Knight
The different colors of the knights are used to indicate the character of a takeover, which is, a deal made to establish control by one company of another or start a process of an acquisition. The yellow knight is a firm that unleashes aggression and seeks to buy a company against its wishes, but later departs from this idea and instead proposes to merge.
If you have not been able to triumph, just simply join, this is the unspoken motto of the yellow knights. However, there can be many reasons for refusing the takeover attempt.
In most cases, the yellow knight company adequately assesses the value of a target company, or rather the fact that after some certain time its value will increase. Sometimes the yellow knight company understands that the protection against the takeover of a target company will be stronger and that a change of strategy is needed.
During the negotiation process, the yellow knight may find himself in a weak position and realize that a friendly merger is the only option to obtain the target company assets. And then the yellow knight immediately moves from trying to intimidate the object for subsequent submission and absorption to a proposal to join efforts.
What is the reason for the yellow color in the name of these types of companies? This is primarily due to the fact that yellow color is associated with deceit and cowardice. The expression "yellow knight" is itself pejorative, suggesting that the hostile member chickened out and evaded the takeover attempt.
Yellow Knight and other types
In mergers and acquisitions (M&A) processes, there are four colors to describe the acquiring company. There are the following types of knights, except for the yellow knight:
Black knights. This type of company makes an undesirable, hostile takeover offer, but unlike the yellow knights, these firms maintain this position to the end. This type of firm poses a danger to the management of the target company, as black knights carve their own path to power and pursue goals that are different from those of the current management.
White knights. A friendly force whose goal is to save the target company from another potential buyer in order to make a quick profit is the white knight, which is the opposite of both yellow knights and black ones. In order to keep their business or negotiate the most favorable takeover terms, the management of the target company is in search of a white knight. The white knight may need this to obtain some kind of incentive, such as paying a lower premium for gaining control than would be required in a truly competitive environment.
Gray knights. This knight type is something intermediate between black and white knights. A gray knight is a more peaceful alternative to the aggressive black knight, which uses this advantage to strike a deal on the most favorable terms.
