A white squire is an investor that acquires partial interest in a company, without actually owning a controlling interest. Typically, the acquisition is agreeable to the company, and may amount to enough of an investment to deter a hostile takeover attempt. Doing so helps to strengthen the position of the current owners, since it is anticipated that the white squire will stand along with those owners in the face of the investor or group of investors that wish to take over the business.
There are some similarities between a white squire and a white knight. Both parties are considered allies to the current owners in the task of defeating a takeover attempt. A major distinction has to do with the role that each party plays in averting that takeover. A white knight will acquire a majority interest in the company, with the blessing of the current owners. In contrast, a white squire will acquire a significant but still minority interest in the company, a move that minimizes the amount of shares available for purchase in the marketplace.
The white squire stands in opposition to the black knight in an acquisition attempt. A black knight seeks to gain control of a company over the objections of the current owners, using any legal means possible to achieve that goal. If the white squire owns a significant block of stocks and chooses to stand with owners who hold controlling interest in the business, it is possible to prevent the black knight from securing enough of an interest to force a takeover. At times, this strategy results in changing the black knight into a what is known as a yellow knight. The yellow knight is an investor who has abandoned the takeover attempt, and now wishes to enter into a merger situation with the current owners.
While the white squire is typically perceived as an ally and asset to those who wish to retain control of a company, there is a degree of risk associated with this strategy. Should the squire determine at a later date that he or she is not happy with the current ownership, there is the chance that the squire will switch allegiances from the owners to the black knight attempting to take over the business. When this occurs, the potential for the black knight to succeed in the hostile takeover bid is increased significantly. For this reason, owners often evaluate potential squires with great care, making sure they are highly likely to remain steadfast in their support.