Gray Knight

A gray knight is a second unsolicited bidder in a public merger or acquisition, which takes advantage of any problems that might arise between the target company and the first bidder. It may outbid the first bidder, or offer a better alternative to a black knight attempting a hostile takeover.

Gray knights are like circling vultures, waiting for merger deals to get into problems or fail before they cross the finish line — creating a situation that puts the gray knight in a good negotiating position. They might outbid a white knight, or make a less-favorable offer, taking advantage of the fact that the target company sees them as a friendlier alternative to a hostile black knight. But a gray knight may not always reveal its true intentions.