What Does White Knight Mean?
A white knight refers to an investor who protects a firm from an attempted hostile takeover by acquiring the firm. The term derives its meaning from the literary white knight who always saves the day. In business, the target firm seeks out white knight investors for a friendly takeover.
Divestopedia Explains White Knight
Hostile takeovers are generally attempted by businesses or individuals who acquire shares in an open market or make unsolicited proposals for acquisition (or proxy votes) to gain control of the firm's management. In such a situation, the board of a target firm may invite a friendly investor to acquire the firm under reasonable conditions, thus warding off the hostile attempt and thwarting a takeover bid by an unfriendly firm. The friendly acquisition is an acceptable alternative because the management is generally not replaced by the new board. It suits the goals and needs of the target firm.
In some cases, a white knight may also be an investor who acquires a struggling firm (at great risk) to rebuild it. In this situation, the target firm is not under any threat of a hostile acquisition.