UK telecom group Cable & Wireless (C&W) has approached smaller rival Energis about a possible takeover.
Cable & Wireless has been subject to did rumours itself
Chairman Richard Lapthorne confirmed the move at C&W's annual general meeting, but said the firm "cannot be certain" this would lead to a buyout.
Newspaper speculation has suggested such a deal could be worth somewhere in the region of £700m ($1.22bn).
Meanwhile, Mr Lapthorne said trading in the first quarter was in line with forecasts despite tough conditions.
News of the group's acquisition plans boosted C&W's shares sending them 3.25 pence or 2.18% higher to 152.25p in midday trade.
C&W's decision to hit the acquisition trail is in stark contrasts to reports earlier this year that suggested it could be targeted by potential bidders.
In June, newspaper speculation swirled that France Telecom had the firm in its sights and was preparing a £4bn offer.
At the time market commentators claimed that a 22% jump in C&W's share price since May suggested that investors were preparing for a possible bid.