Hill and Motts tipped to be new suitors for Knowles

Speculation surrounded possible bidders for listed dispute resolution firm Knowles this week as the firm claimed a firm offer was due in May.

Market sources claim acquisitive project management group Hill International and international engineering group Mott MacDonald are eyeing up the firm, which has been up for sale since last December. A management buyout has also been mooted.

An initial offer from private consultant Systech, pricing Knowles as 25p a share at a value of £5.25m, was refused that month. The current share price was just below that at 24p as QS News went to press, down from a 38p price at the beginning of the year (see share price graph).

Systech this week reaffirmed its interest in buying Knowles despite not taking part in the official bidding process. The firm, whose directors include Mark Woodward-Smith, said it had written to Knowles last week and was "open to negotiations".

Market sources have pointed to the likelihood of a bid for Knowles from Hill International, which launched an aggressive acquisition drive in the UK last year. The firm is planning to list on the US Nasdaq stock exchange this year, raising $37m (£21.19m) in funds to finance buys in the UK and US. It has a significant presence in the Middle East, where Knowles is also active, and snapped up 17-strong outfit Pickavance in November as well as the Manchester-based dispute resolution arm of Haleys in the summer.

The directors of the company hope that an offer for the company will be forthcoming in May

Roger Knowles

Sources also pointed to the potential for a big engineering group such as Mott MacDonald being interested in Knowles. The firm, which has a turnover of £485m, merged with QS and project management group Franklin + Andrews in 2002. "Having a dispute resolution arm with the geographic spread could well be helpful as far as claims go for the big engineering firms," the source said.

One source also raised the possibility of a management buyout from senior directors at the firm if an agreed external offer was not reached.

Knowles said in an announcement to the Stock Exchange that an information memorandum was sent to interested bidders who then put forward indicative offers last month. "The directors of the company hope that an offer for the company will be forthcoming in May," the statement said. "At this stage there is no guarantee that an offer for the company will be forthcoming and which the directors are prepared to recommend to shareholders."

Roger Knowles, who founded the company 30 years ago, had decided it was time to sell his 60% stake at the age of 68, precipitating the sale. The firm's last results saw pre-tax profits stand at £534,000 for the year to 31 July 2005 on turnover of £30.2m.