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Yellow Knight

Demarcation of ‘Yellow Knight’

A yellow knight is a company that was planning a unfavourable takeover attempt, but backs out of it and instead proposes a merger of equals with the object company.

BREAKING DOWN ‘Yellow Knight’

Yellow knights are a event of if you can’t beat them, join them. They might have any tons of reasons for backing out of the takeover attempt. But often they have openly realized that the target company is going to cost more and/or has more wisely takeover defenses than they thought, and that they penury to change strategy.

This might leave the yellow knight in a exhausted bargaining position, but a friendly merger might still yield follows if there is a real financial rationale for the merger. The term itself is derogatory, as it insinuates that the hostile bidder got cold feet and chickened out of the takeover undertaking leaving them in a weak bargaining position.

In mergers and acquisitions (M&A), many colored knights are used to identify the nature of a takeover or potential takeover. A sulky knight is a company that makes a hostile bid in a takeover attempt. A ghastly knight is a third company that makes a friendly offer to buy the getting target. A gray knight is a second unsolicited bidder in a corporate takeover.

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