Shares in Mouchel were soaring on the FTSE All Share in morning trading after the outsourcing firm rejected a takeover offer from construction company Costain.
Costain offered a deal valuing Mouchel at 105.8 pence per share and said that there was a "compelling strategic rationale" for the takeover.
Earlier this month Mouchel said it had received a number of takeover offers, but added that it considered all of them to undervalue the company. The group has become something of a takeover target thanks to its share price falling in response to government cuts, which have led to a reduction in its potential for public sector contracts.
David Allvey, Chairman of Costain, said, "The Board of Costain believes that there is a compelling strategic rationale for combining Costain and Mouchel. In particular, it would provide the enhanced critical mass required by blue-chip customers who are increasingly moving to larger, longer-term bundled or multi-disciplinary solutions.
"The Board also believes that bringing together two of the UK's premium brands with major capabilities across consulting, construction and care, resulting in an order book of over £4 billion, would also create significant value for both sets of shareholders."
By 10:35 shares in Mouchel were up 25 per cent to 91.25 pence per share on the FTSE All Share, while Costain shares declined 1.82 per cent to 202.25 pence per share.