DEFINITION of ‘Yellow Knight’
A company that was once making a takeover attempt but ends up discussing a merger with the target company. Yellow knights have various reasons for backing out of the takeover attempt, but frequently are attributable to the target company’s ability to fend off takeover. The “yellow” in “yellow knight” may refer to the colour’s association with cowardice. Since a yellow knight backs down from a takeover attempt and retreats to merger discussions, a yellow knight may be viewed as weak.
INVESTOPEDIA EXPLAINS ‘Yellow Knight’
In mergers and acquisitions (M & A), various coloured knights are used to identify the nature of a takeover or potential takeover. A black knight is a company that makes a hostile takeover offer for the target company. A white knight makes a friendly takeover offer to a target company that is being faced with a hostile takeover. A grey knight is a second unsolicited bidder in a corporate takeover.