White Knights and Black Knights – Does the Search for Competitive Bids always Benefit the Shareholders of “Target” Companies? –

Abstract

Abstract According to the EC Directive on Takeover Bids, defensive measures should be authorised by the general meeting of the target company. The incumbent board can, nonetheless, search for a competing bid, a so-called “white knight”. The rationale underpinning this exception is that competing bids always benefit target's shareholders. In this paper I will tackle this rationale, arguing that even competing bids could generate a pressure to tender on target's shareholders and, therefore, in this case should not be considered as a benefit for them.