Series 79 practice questionmediumAnti-Takeover Defenses
In a 'white knight' defense, the target company:
- AAcquires the hostile bidder's shares on the open market
- BSeeks a friendlier acquirer to make a competing bid✓ Correct answer
- CIssues new debt to make itself less attractive
- DSells all of its assets to a liquidating trust
Explanation
Why B — Seeks a friendlier acquirer to make a competing bid
A white knight defense involves the target company seeking out a more favorable acquirer to make a competing bid that the target's board prefers over the hostile offer. The white knight is typically a strategic buyer that the board believes will offer better terms, preserve the company's culture, or maintain operations. This defense allows the board to fulfill its fiduciary duty to maximize shareholder value while also gaining more favorable deal terms.
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