Staggered Board & Supermajority Provision
In an unclassified board of directors, stockholders elect all of the directors each year. In a classified, or staggered, board, only a fraction of the board is elected each year, with terms running for multiple years. For example, one-third of the board might stand for election each year, with terms running for three years. Staggered bord increase the time an acquirer needs to obtain a majority of seats on the board. In the previous example, the acquirer can gain control of only one-third of the seats in the first year after acquisition. Another year must pass before the acquirer is able to control two-thirds of the seats. Therefore, the acquirer may not be able to change management as quickly as it …show more content…
While the target company doesn't remain independent, a white knight is viewed as a preferred option to the hostile company completing their takeover. Unlike a hostile takeover, current management typically remains in place in a white knight scenario, and investors receive better compensation for their shares.
The white knight is the savior of a company in the middle of a hostile takeover. Often, company officials seek out a white knight – sometimes to preserve the company's core business, and other times just to negotiate better takeover terms. An example of the former can be seen in the movie "Pretty Woman" when corporate raider/black knight Edward Lewis, played by Richard Gere, has a change of heart and decides to work with the head of a company he'd originally planned on …show more content…
The white knight might be a favored simply because it is willing to pay a higher purchase price. Alternatively, it might promise not to lay off employees, fire managers, or sell off division. Management instead may wish to avoid any acquasition at all. A third party, termed a white squire, might be invited to make a significant investment in the firm, under the condition that it vote with management and not purchase additional shares. White squires are generally offered shares at favourable prices. Billionaire investor Warran Buffett has acted as a white squire to many firms, including Champion International and
In an unclassified board of directors, stockholders elect all of the directors each year. In a classified, or staggered, board, only a fraction of the board is elected each year, with terms running for multiple years. For example, one-third of the board might stand for election each year, with terms running for three years. Staggered bord increase the time an acquirer needs to obtain a majority of seats on the board. In the previous example, the acquirer can gain control of only one-third of the seats in the first year after acquisition. Another year must pass before the acquirer is able to control two-thirds of the seats. Therefore, the acquirer may not be able to change management as quickly as it …show more content…
While the target company doesn't remain independent, a white knight is viewed as a preferred option to the hostile company completing their takeover. Unlike a hostile takeover, current management typically remains in place in a white knight scenario, and investors receive better compensation for their shares.
The white knight is the savior of a company in the middle of a hostile takeover. Often, company officials seek out a white knight – sometimes to preserve the company's core business, and other times just to negotiate better takeover terms. An example of the former can be seen in the movie "Pretty Woman" when corporate raider/black knight Edward Lewis, played by Richard Gere, has a change of heart and decides to work with the head of a company he'd originally planned on …show more content…
The white knight might be a favored simply because it is willing to pay a higher purchase price. Alternatively, it might promise not to lay off employees, fire managers, or sell off division. Management instead may wish to avoid any acquasition at all. A third party, termed a white squire, might be invited to make a significant investment in the firm, under the condition that it vote with management and not purchase additional shares. White squires are generally offered shares at favourable prices. Billionaire investor Warran Buffett has acted as a white squire to many firms, including Champion International and