Embattled outsourcing firm Mouchel has revealed it was facing potential hostile takeover bids after financial fears have sent its shares plunging.
The group - which develops infrastructure for councils and government agencies - said it had received recent approaches, but added it believes they do not “reflect the true value of the company”.
Mouchel has been hit by a drop in demand after the change of government in May as departments have reined in spending and postponed or scaled down projects.
Its shares have slumped to below 60p in recent weeks from a year high of 268p as investors have headed for the exit amid concerns over the impact of government spending cuts and as Mouchel holds crucial talks over the refinancing of its debt pile.
Shares in Mouchel soared as much as 34% after news of the approaches.
However, the group stressed it was making progress with self-help measures to get the business back on track.
It is considering selling non-core parts of the business and is looking at a possible fundraising to shore up its balance sheet.
The group’s lenders appointed accountancy firm Deloitte to carry out a review of Mouchel as they hammer out details of a refinancing.
Mouchel said these talks were “proceeding to plan” and added that steps to help the business were “proving successful”.
But it confirmed that there was no end in sight for the challenging market conditions seen over the past six months, with public sector clients delaying spending decisions.
The group axed its final dividend in October after posting a pre-tax loss of £14.7m and a 15% drop in revenues to £632.6m for the year to July 31.
It has rolled out a £25m cost saving programme to help combat tough conditions, with further staff cuts taking job losses since 2009 to 2,000.
The group said despite ongoing troubles among its target client market, it was starting to see greater clarity around client budgets.
“We have also seen a significant increase in the number of local authorities preparing for service transformation, outsourcing and partnership with the private sector,” added Mouchel.
It hopes opportunities for long-term contracts will pick-up in the first half of 2011, although it said it had continued to win new contracts and extend existing relationships.
Its order book stood at £1.8bn at the end of November.