How It Works
- 1
Target faces hostile bid at significant premium
- 2
Board begins process to solicit alternative bids
- 3
Identifies 'friendly' acquirer willing to preserve management, culture, etc.
- 4
White knight makes competing bid (often slightly higher)
- 5
Target board recommends white knight's bid to shareholders
Key Mechanics
Revlon duties require board to get best price in change of control
Break-up fees limit board's ability to favor white knight
No-shop provisions limit but don't prevent competing bids
Go-shop periods allow target to test market
Regulatory Context
Delaware's Revlon v. MacAndrews (1986) established that once sale is inevitable, board's duty shifts to getting best price for shareholders.