Institutional shareholders in Debenhams believe the £1.5bn bid for the department store group could fail due to the rise in equity markets over the past three months.
Several fund managers believe there is a growing sense of unease about private equity firms snapping up publicly quoted companies at low valuations. Some Debenhams investors are considering voting against the indicative offer of 425p per share being prepared by Permira, the venture capital group.
One senior fund manager said of the bid attempt: "There is a possibility that it has been stranded by the rising market. We didn't think it was particularly generous. This is one of the better management teams operating in the listed market."
The fund manager added that there is likely to be a wider rebellion against the offer among Debenhams' shareholder base. "I think investors are becoming concerned by these cheap offers coming in. Just because they get a chunk of acceptances it doesn't mean everyone else has to do the same."
The stock market has seen a flood of private equity bids for publicly quoted companies as share values fell as a result of a three-year bear market. Companies which have succumbed include Allders and Esporta, the health club operator. Others in the process of going private include Selfridges, Fitness First and Hamleys, while private equity bids for Somerfield, House of Fraser and Austin Reed have been turned down.
Despite yesterday's 70 point drop in the FTSE100 the "Baghdad bounce" in shares since March may mean the high water mark of these so-called "public-to-private" deals may already have passed.
Some fund management firms have shown themselves willing to turn down bids and remain holders of privately controlled companies. At the weekend it emerged that Deutsche Asset Management had increased its stake in health club operator Fitness First to over 10 per cent and had decided not to accept the £210m offer from Cinven.
With the Debenhams bid some shareholders have expressed concern over the possibility of management being compromised by the bid. "If the bid should fall away there would be questions about the motivation of the directors concerned," one observed. Another fund manager said: "There is a problem with subversion of loyalty once you get these situations."
There have been questions over the independence of Peter Jarvis, Debenhams chairman, who stands to make £200,000 from the Permira deal thanks to a 12 month contract. But most shareholders believe that the committee of non-executive directors is sufficiently independent, led by senior non-executive, Tim Clarke, chief executive of pubs group Mitchells & Butlers.
Separately yesterday there was speculation that Goldman Sachs and Blackstone, the US venture capital firm might have joined Permira's bid for Debenhams. None of the firms would comment. If Permira has enlisted additional support it could give it greater firepower to increase its bid if necessary. Some shareholders are supportive of the current Permira proposals which, include Belinda Earl, chief executive and Matthew Roberts, finance director.
Debenhams shares closed 1.25p lower at 403.75p.