Abstract: From the practice that the target company often introduces the white knight to resist the hostile M&A, the dynamic competitive and hostile M&A model is built under the white knight strategy by introducing the termination fee agreement. The critical points of the pater are the solutions in equilibrium for optimal bidding strategies in bidding phase, the optimal entering decisions for the white knight, the optimal termination fee strategy for the target company, and the best initial offering strategy for the hostile acquirer in the sequential entry phase, and the optimal hostile merger timing for the hostile acquirer in the timing choice phase. The research results show that the termination fee reduces both the optimal biddings of the hostile acquirer and the white knight, but does not change the bidding result, that is, the acquirer with the largest synergy coefficient obtains the target enterprise ownership. There is a threshold of the synergy coefficient. When the synergy coefficient of the hostile acquirer is higher than the threshold, the hostile bidder makes a preemptive bid, and the target company accepts the offer; otherwise, the hostile bidder does not make the preemptive bid, the target company signed a termination fee agreement with the white knight, and the white knight competed with the hostile M&A for the target company. The white knight strategy increases the synergy coefficient threshold and preemptive bid, reduces the expected merger value of the hostile acquirer, delays the timing of hostile M&A, and prevents the occurrence of hostile M&A with positive returns when the random impact is small.

Key words: dynamic competitive and hostile mergers; white knight; termination fee agreement; merger bidding; merger timing