A white squire is an investor who acquires a minority interest in a company to prevent a hostile takeover attempt. They are allies of the current owners and oppose the black knight. Unlike a white knight, they do not acquire a majority stake. However, there is a risk that they may switch allegiance to the black knight, increasing the chance of a successful takeover.
A white squire is an investor who acquires a partial interest in a company, without actually owning a controlling interest. Typically, the takeover is welcome to the company and can be a sufficient investment to deter a hostile takeover attempt. This helps strengthen the position of the current owners, since the White Squire is expected to stand together with those owners opposite the investor or group of investors wishing to take over the business.
There are some similarities between a white squire and a white knight. Both sides are seen as allies of the current owners in defeating a takeover attempt. An important distinction has to do with the role each party plays in avoiding such a takeover. A white knight will acquire a majority stake in the company, with the blessing of the current owners. Conversely, a white squire will acquire a significant but still minority interest in the company, a move that minimizes the amount of stock available for purchase in the market.
The white squire opposes the black knight in a takeover attempt. A black knight seeks to gain control of a corporation over the objections of the current owners, using any legal means possible to achieve that goal. If the white squire owns a significant block of stock and chooses to stay with the owners who hold the controlling interest in the business, the black knight can be prevented from securing enough interest to force a takeover. Sometimes, this strategy results in turning the black knight into a so-called yellow knight. The yellow knight is an investor who abandoned the takeover attempt and now wishes to enter into a merger situation with the current owners.
While the White Squire is generally perceived as an ally and asset to those looking to maintain control of a business, there is a certain degree of risk associated with this strategy. If the squire later determines that he is dissatisfied with the current ownership, there is a possibility that the squire will switch allegiance from the owners to the black knight who attempts to take over the business. When this occurs, the chance of the Black Knight’s successful hostile takeover bid increases significantly. For this reason, owners often evaluate prospective squires very carefully, making sure they are likely to stand firm in their support.
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