White knight

In business, a white knight may be a corporation, a private company, or a person that intends to help another firm. There are many types of white knights. Alternatively, a gray knight is an acquiring company that enters a bid for a hostile takeover in addition to the target firm and first bidder, perceived as more favorable than the black knight (unfriendly bidder), but less favorable than the white knight (friendly bidder).
The first type refers to the friendly acquirer of a target firm in a hostile takeover attempt by another firm. The intention of the acquisition is to circumvent the takeover of the object of interest by a third, unfriendly entity, which is perceived to be less favorable. The knight might defeat the undesirable entity by offering a higher and more enticing bid, or strike a favorable deal with the management of the object of acquisition.
In short, if Company T (target) is going to be acquired by Company H (hostile firm), but Company A (acquirer) can acquire ownership of Company T, then Company A would be acting as the white knight.
The second type refers to the acquirer of a struggling firm that may not necessarily be under threat by a hostile firm. The financial standing of the struggling firm could prevent any other entity being interested in an acquisition. The firm may already have huge debts to pay to its creditors, or worse, may already be bankrupt. In such a case, the knight, under huge risk, acquires the firm that is in crisis. After acquisition, the knight then rebuilds the firm, or integrates it into itself.

Examples of white knights

1. 1953 - United Paramount Theaters buys nearly bankrupt ABC
2. 1982 - Allied Corporation buys Bendix Corporation in a situation involving the "Pac-Man defense". Allied is drafted in when the company that Bendix tries a hostile takeover on fights back by buying up Bendix stock in attempt to create a reverse hostile takeover.
3. 1986 - George Soros's Harken Energy buying George W. Bush's Spectrum 7
4. 1998 - Compaq merging with financially weak DEC
5. 2001 - Dynegy attempts to merge with Enron to cover Enron's massive debts (the merger failed as it became obvious that Enron had been committing fraud, resulting in the Enron scandal.)
6. 2003 - SAP was seen by analysts as the most likely to help defeat Oracle's hostile for PeopleSoft, however it came to nothing.
7. 2006 - Severstal almost acted as a white knight to Arcelor as the merger negotiations were in place between Arcelor and Mittal Steel
8. 2007 - Nissin launching a friendly 37bn yen ($314m; £166m) bid for Myojo Foods after US hedge fund Steel Partners offered 29bn yen to buy the firm.

Poison pill

Poison pill originally meant a literal poison pill (often a glass vial of cyanide salts) carried by various spies throughout history, and by Nazi leaders in WWII. Spies could take such pills when discovered, eliminating any possibility that they could be interrogated for the enemy's gain. It has since become a term referring to any strategy, generally in business or politics, to increase the likelihood of negative results over positive ones for anyone who attempts any kind of takeover.
BusinessIn business, poison pills are often used to avoid takeover bids. Takeover bids are attempts by a potential acquirer to obtain a controlling block of shares in a target company, and thereby gain control of the board and, through it, the company's management. There are several types of "poison pills" that can be planned by the management of a company that thinks it may be the target of a takeover by a potential acquirer, but the conventional poison pill is now a shareholder rights plan.
Shareholder Rights PlansThe target company issues rights to existing shareholders to acquire a large number of new securities, usually common stock or preferred stock. These new rights usually allow holders (other than an acquirer) to convert the right into a large number of common shares if anyone acquires more than a set amount of the target's stock (typically 10-20%). This immediately dilutes the percentage of the target owned by the acquirer, and makes it more expensive to acquire control of the target. This form of poison pill is sometimes called a shareholder rights plan because it is intended to give management (and possibly shareholders) the right to approve an acquisition, potentially requiring the acquirer to pay a premium for control of the target. Because the board of directors of the company can redeem or otherwise eliminate a standard poison pill, it does not typically block or impede a proxy fight or other takeover not accompanied by an acquisition of a significant block of the company's stock.
Other tactics"Poison pill" is sometimes used more broadly to describe other types of takeover defenses that involve the target taking some action that harms both target and bidder, although the broad category of takeover defenses is more commonly known as "shark repellents" and includes the traditional shareholder rights plan poison pill. Other antitakeover protections include:
The target adds to its charter a provision which gives the current shareholders the right to sell their shares to the acquirer at an increased price (usually 100% above recent average share price), if the acquirer's share of the company reaches a critical limit (usually one third). This kind of poison pill cannot stop a determined acquirer but ensures a high price for the company. The target takes on large debts in an effort to make the debt load too high to be attractive - the acquirer would eventually have to pay the debts. The company buys a number of smaller companies using a stock swap, diluting the value of the target's stock. The target grants its employees stock options that immediately vest if the company is taken over. This is intended to give employees an incentive to continue working for the target company at least until a merger is completed instead of looking for a new job as soon as takeover discussions begin. However, with the release of the "golden handcuffs", many discontented employees may quit immediately after they've cashed in their stock options. This poison pill may create an exodus of talented employees. In many high-tech businesses, attrition of talented human resources often means an empty shell is left behind for the new owner. Peoplesoft guaranteed its customers in June 2003 that if it were acquired within two years, presumably by its rival Oracle Corporation, and product support were reduced within four years, its customers would receive a refund of between two and five times the fees they had paid for their Peoplesoft software licenses. The hypothetical cost to Oracle was valued at as much as US$1.5 billion. The move was opposed by some Peoplesoft shareholders who believed the refund guarantee flagrantly opposed their interests as shareholders. Peoplesoft allowed the guarantee to expire in April 2004. The practice of having staggered elections for the Board of Directors. For example, if a company had nine directors, then three directors would be up for re-election each year, with a three-year term. This would present a potential acquirer with the position of having a hostile board for at least a year after the first election. In some companies, certain percentages of the board (33%) may be enough to block key decisions (such as a full merger agreement or major asset sale), so an acquirer may not be able to close an acquisition for years after having purchased a majority of the target's stock.
HistoryThe poison pill was invented by noted M&A lawyer Martin Lipton of Wachtell, Lipton, Rosen & Katz, in 1982, as a response to tender-based hostile takeovers[1]. Poison pills became popular during the early 1980s, in response to the increasing trend of corporate raids by businessmen such as Carl Icahn. Although the legality of poison pills was unclear for some time, they were upheld as a valid instrument of Delaware corporate law by the Delaware Supreme Court in its November 1985 decision Moran v. Household International, Inc.
It was reported in 2001 that since 1997, for every company with a poison pill that successfully resisted a hostile takeover, there were 20 companies with poison pills that accepted takeover offers.[2] The trend since the early 2000s has been for shareholders to vote against poison pill authorization, since, despite the above statistic, poison pills are designed to resist takeovers, whereas from the point of view of a shareholder, takeovers can be financially rewarding.