Gray Knight
Categories: Financial Theory, Entrepreneur
You own a small local chain of tamale restaurants. A major fast food conglomerate, Fat N’ Stuff Inc., offers to buy you out. You turn them down. They take the offer hostile, making a public bid to takeover the company. In other words, they have become a black knight...an evil outsider looking to conquer your castle.
You might be able to fight off the takeover. More likely, to avoid becoming part of the Fat N’ Stuff empire, another company will have to become a bidder. If it’s someone you want to acquire you, a hero swooping in to save you, that company becomes a white knight.
The other choice: a gray knight. A gray night isn't as attractive as a white knight, but a merger with them is still preferable to a black knight hostile bid. You're not happy about the situation, but you'd rather negotiate an amicable agreement with the grey knight than let the black knight storm in.