White Knights and the Corporate Governance of Hostile Takeovers

Riccardo Calcagno () and Sonia Falconieri ()
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Riccardo Calcagno: VU University Amsterdam
Sonia Falconieri: Brunel University

No 08-118/2, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: We analyze the dynamics of takeover contests where hostile raiders compete against white knights involved by a lead blockholder of the target firm (the incumbent). We assume that the incumbent has the power to bargain with the potential bidders to set a minimum takeover price. We characterize the conditions under which a white knight wins the takeover contest despite the smaller value of its synergies as compared to those of the hostile bidder. The paper provides a new explanation for the reason why we observe so few hostile takeovers in reality; moreover, it sheds some light on the effectiveness of white knights as an anti-takeover device and the role played by leading minority blockholders in the market for corporate control.

Keywords: Hostile takeovers; white knights; Nash bargaining (search for similar items in EconPapers)
JEL-codes: D44 G34 (search for similar items in EconPapers)
Date: 2008-12-15
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20080118

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