Firms that choose to become “white knights” in contested takeover bids come from many different industries and are representative of other firms in their industries in terms of return on equity and gross operating margin. Not surprisingly, white knights have substantially higher leverage and substantially lower cash turnover than other firms.

White knights as a group do not earn significant abnormal returns before or after a tender offer. The white knights that succeed in their offers, however, come systematically from industries that have performed better over the five years prior to the offer than those white knights whose offers fail.

Following a merger, the successful white knights appear to experience significant positive excess returns, whereas the unsuccessful white knights appear to exhibit significant negative abnormal returns. In neither case, however, is the abnormal performance net of the control group’s significant. The shareholders of successful white knights are not appreciably better off as a result of the merger.