McCarthy & Stone - the UK's largest builder of retirement homes - yesterday revealed it was weighing up takeover approaches from more than one party.
Shares rose by more than 11 per cent, although the company stressed the interest was the subject of pre-conditions, including due diligence.
It added: "Discussions with regard to these approaches are ongoing and the board of the company will provide an update to shareholders as appropriate in due course."
Bournemouth- based McCarthy & Stone is responsible for about 60 per cent of retirement homes built in the UK, but said in November that annual profits fell 14 per cent after the toughest housing market it had seen in years.
The share price rise added £100 million to the value of McCarthy, taking its market capitalisation to £906 million. The company made no comment on the potential bidders.
The UK construction sector has undergone a wave of consolidation in recent years as firms seek economies of scale in a housing market that has slowed since mid-2004, though it has recently showed some signs of strengthening.
Late last year, Persimmon acquired smaller rival Westbury for £643 million to become the country's biggest housebuilder.
"I think it could be an attractive proposition to a lot of people, given that McCarthy & Stone is a retirement building specialist and it's very difficult marketplace to get into," said Rachael Waring, an analyst at Numis Securities.
The firm, which is expected to report £115 million in pretax profit for the year to end-August on a revenue of £339.8 million, trades at 10.3 times forecast earnings, versus the average of 11.7.
McCarthy & Stone, which specialises in building one and two-bedroom apartments of 500 to 800 square feet, has said it sees a great growth opportunity for the long term as the population in the UK ages, with a growing number of elderly people living longer and opting to live on their own.
Around 30 per cent of UK households are headed by those aged 60 or over.