Carillion said in a statement: 'While discussions are progressing, there can be no assurance that an offer will be forthcoming.'
Altium Securities analyst Andrew Nussey speaking to Dow Jones said Carillion would have to do 'an awful lot of due diligence' on Mowlem to make sure its accounting problems are fully ironed out. He also warned the two could face big issues bringing the company cultures together.
Just before Mowlem announced an unnamed party had made a preliminary takeover approach on October 31, which turned out to be Carillion, Mowlem's share price surged 15 per cent to 200p - close to its years high of 223.5p.
Lazard is acting as financial adviser to Carillion and Mowlem is being advised by Rothschild.
In January Simon Vivian took over from long-standing chief executive Sir John Gains who retired after 9 years running Mowlem. Following a review of the business, he criticised the financial accounting policies of the previous regime and introduced a new system which he said was 'more prudent and consistent.'
He also replaced finance director Gerry Brown with Paul Mainwaring in May.
In July Mr Vivian began a review of the way Mowlem recognised contract profits and values. By September he and Mr Mainwaring had gone over about 80 per cent of the firm's 1,000 contracts and had made adjustments on around 80 of them.
Mowlem has an order book worth £2.3 billion and a strong PFI portfolio estimated to be worth £100 million, which will be even more attractive if the group reaches financial close on its joint ventured £5 billion Allenby Connaught project for the Ministry of Defence, which is expected in the New Year.