White Squire: What it Is and How It Works

Overview

A white squire is a friendly investor or company that purchases a partial stake in a target firm to block or deter a hostile takeover. Unlike a white knight, which typically acquires the entire company to fend off an unwanted bid, a white squire takes a minority position—large enough to prevent the hostile bidder from gaining control but small enough that the target company retains independence.

Key points

• A white squire buys a partial stake to prevent a hostile takeover.
• It does not take a controlling interest, unlike a white knight.
• Incentives for a white squire often include discounted shares, special dividends, or a board seat.
• Transactions commonly include agreements limiting the squire’s ability to sell to the hostile bidder or to increase its stake.

How it works

1. A target company facing a hostile bid invites (or accepts) a friendly investor to buy a significant minority stake.
2. The squire’s stake is sized to block the hostile bidder from reaching the ownership threshold needed for control.
3. The target may grant incentives—preferred dividends, equity discounts, or a board seat—to secure the squire’s support.
4. Once the hostile bidder withdraws, the squire will often sell its shares, subject to any contractual restrictions.

Agreements and protections

To keep the arrangement stable, the deal usually includes one or more of the following:
* Voting agreements specifying the squire must vote with existing management on takeover matters.
* Tender restrictions preventing the squire from selling its shares to the hostile bidder.
* Standstill provisions limiting the squire’s ability to increase its stake in the future.

Risks and limitations

• A white squire gains partial influence over company decisions, which can be beneficial or problematic if the squire later pushes for changes.
• If the squire becomes dissatisfied, it can exert pressure on management or the board.
• Structuring the deal requires careful legal safeguards to prevent the squire from switching allegiances or becoming a future activist.

Example

In 2013, when América Móvil sought to acquire Dutch telecom KPN, an independent foundation charged with protecting KPN’s interests blocked the takeover—an example of a defensive stake used to thwart an unwanted bid. Historically, CBS enlisted Loews Corporation as a white squire (25% stake) to fend off a takeover attempt; however, the relationship later soured and Loews pushed for leadership changes.

Related takeover defenses

Other strategies companies use to resist hostile bids include:
* Poison pills (shareholder rights plans)
* Greenmail
* Pac-Man defense (counteroffer to acquire the acquirer)
* Staggered boards
* Supermajority voting requirements

Bottom line

A white squire is a targeted, strategic minority investor used as a defense against hostile takeovers. It offers a middle ground between doing nothing and selling to a friendly buyer, but it requires careful structuring to align incentives and limit future risks.