What Does Lady Macbeth Strategy Mean?
Lady Macbeth Strategy, used in mergers and acquisitions, is a strategy where a company that shows no interest in acquiring a target company acts as a white knight to gain the trust of the target company's management. In the process, it may also be able to gather information that is not shared by the target company to its likely acquirers. After getting all the needed information, the white knight aligns with other bidders and acts against the target company. This strategy is taken after the character of Lady Macbeth in Shakespeare's play as she is portrayed as cunning, ruthless and ambitious.
Divestopedia Explains Lady Macbeth Strategy
Lady Macbeth is a powerful character from Shakespeare's play, "Macbeth." In this play, she acts as a loyal servant and gains the trust of the King of Scotland then creates a plan to kill her husband. Here, it is her pretense and false loyalty that helps her to be successful in her ambitions.
Similarly, Company A wants to buy Company B, but B does not want to sell to A and actively seeks other bidders. In this situation, Company C comes along and offers to buy B at the terms and conditions that are favorable to B. Company C also gets inside information and ends up changing the deal to make it more viable for everyone. When B and C agree on price terms, C turns around and brings in A by getting them to fund the purchase of B. As a result, A will have a stake in B because they have funded it. Thus, B did not want to sell to A, but indirectly allowed A to purchase the firm through another company, C. In this case, C is called the white knight and the entire strategy is called the Lady Macbeth Strategy.
This strategy is not commonly used because it creates feelings of mistrust and disloyalty among the old and new management.