It's just over a month since former IBI investment banker Richard Keatinge took over as chairman of Heiton, and it may not be too long before the chairman's investment banking expertise is put to the test by Grafton's Michael Chadwick and Norman Kilroy.

After being out of the market for Heiton shares for some time, Grafton came back into the market with a bang a week ago, when it snapped up almost 5 per cent of Heiton held by Canada Life's Setanta Asset Management arm at a cost of €7.3 million (£9.3 million), taking its stake in Heiton to almost 19 per cent.

It's not immediately obvious why Setanta decided to sell most of its Heiton shares on a multiple of little more than seven times earnings. Presumably Setanta believes Grafton is not going to bid for Heiton and now is the time to exit a small-cap stock. It's hard to otherwise explain why a 5 per cent stake in a company seen by most in the market as a takeover target should change hands at such a low price.

Certainly, the other big institutional shareholders, AIB, Fidelity, BIAM and Friends First - scenting a bid from Grafton - are now highly unlikely to sell any of their shares. Why lose out on the prospect of a far higher price when Grafton makes its move?

So far, Grafton has built up its 19 per cent stake in Heiton cheaply on an average earnings multiple of seven. Grafton itself is trading on 10 times earnings and that is probably the sort of multiple that Michael Chadwick and Normal Kilroy will have to offer if they are to get the support of Richard Keatinge, Leo Martin and the rest of the Heiton board.