News that Philip Green may bid for Marks & Spencer follows weeks of speculation that the troubled retail giant may be ripe for takeover.

Fellow retailer Tesco is also said to be circling Marks & Spencer, whose profits slump has prompted it to cut suppliers' contracts.

Already the bid is following the established route for mergers and takeovers.

The first sign a takeover may be on the cards is often speculative newspaper reports, which usually boost the share price of the targeted company.

The rising share price in itself becomes news as more potential bidders are outed in the press.

The fact that Philip Green has confirmed he may bid should insure the story of a possible bid remains in the headlines for some time to come.

Mr Green has also appointed investment bank Donaldson Lufkin & Jenrette to advise him on a possible bid.

Lets talk

The next step in the process is if Philip Green approaches Marks & Spencer directly to engage in merger talks.

Bidders may offer shareholders shares in its own company or cash.

Many analysts say this is unlikely to happen anytime soon.

"Anyone who's interested will be waiting until M&S make their (post-Christmas) trading statement in January," one said.

There are two kinds of mergers and at this stage it is unclear which camp the Marks & Spencer bid will fall into.

If Marks & Spencer want to merge with either Philip Green or Tesco then it is an agreed merger.

If it doesn't, and the bidders try to win control of the company without its agreement, then it becomes a hostile takeover.

For this to succeed, the bidding company needs to win shareholder approval. The board of management will make its recommendations to shareholders who will ultimately vote for or against the bid.

Shareholders may decide to ignore the board's advice if they think the prospective bid offers them a chance for hefty profits or believe the bidders' plans for the company will offer more value in the long term.

Bidding war

If both Tesco and Philip Green decide they want to buy Marks & Spencer, then a bidding war could ensue.

National Westminister Bank is currently the subject of a bidding war between Royal Bank of Scotland and the Bank of Scotland, with the two competing to offer investors the best deal.

The battle is often not just for the minds of shareholders, but for public approval of their bid as well.

This may take the form of public statements, reassurances that job cuts will be minimal if the merger goes ahead as well as promises of consumer benefits.

It's up to the regulators

Winning over the shareholders is just one step in the merger game. Getting regulatory support for a deal is just as important.

If Tesco were to bid for Marks & Spencer, UK and European regulators would probably take an interest. Their concern would be that a merger would create an uneven playing field, distorting competition.

Tesco is expected to be asked by the Takeover Panel, responsible for mergers and acquisitions in the UK, to make a "put up or shut up" statement about its intentions.

At the moment, big takeovers are examined by the Office of Fair Trading and the Competition Commission, formerly the Monopolies and Mergers Commission (MMC).

At present takeovers can be referred only if the assets of the company to be taken over are more than £70m, a threshold likely to be lifted.

UK authorities may also investigate if as a result of the merger, 25% or more of the supply or purchase of goods or services comes under the control of the merging enterprise, or a 25% share is increased.

European regulators may also take an interest. The European Commission can control mergers where the parties have an aggregate worldwide turnover exceeding 5 billion euro and at least two of the parties have a Community turnover exceeding 250 million euro.