The Tanfield Group gained the backing of City investors yesterday over plans to raise up to £12m to fund a major acquisition.

The group, based in Stanley, County Durham, will raise the money to buy a manufacturing company, believed to be a global company operating in similar markets to Tanfield.

It is expected to announce the acquisition within the next three weeks.

Shareholders at a meeting yesterday gave their backing to the £12m share placing - the group's largest to date.

Roy Stanley, Tanfield's chairman and chief executive, said: "This motion received almost unanimous backing from our shareholders, which shows the level of support we enjoy in the City.

"Institutional investors do not throw their money away. But they understand what we are achieving and what we want to achieve in the future."

More than 90 per cent of shareholders voted in favour of the placing. The group has raised a total of £14.1m in four share placings since October 2004.

Last night, Mr Stanley declined to reveal the identity of the target company, but said it would surprise people.

"Deals of this nature can fall through at the last minute on a legal technicality, so we don't want to start counting our chickens just yet," he said.

"All I can say is that it would be a fantastic fit with our existing operations. It is a well respected brand name in its field, with operations in the US, Asia and Europe.

"This deal has the potential to make us a truly global player, while providing a bridgehead into new foreign markets for our existing brands."

Tanfield, which is listed on the junior stock exchange, the Alternative Investment Market, began as a sub-contract engineering firm, divided between sheet metal fabrication and the high volume manufacture of automotive components.

It moved its core business to become a provider of engineering solutions, working for blue-chip companies, such as BAE Systems.

It expanded into manufacturing commercial electric vehicles and powered access equipment when it bought the SEV Group in October 2004.

The company is due to report full year figures for last year next month, and analysts expect sales of £22m and profits of £1.3m.

However, any acquisition would force the company to revise predictions for the year of sales of £39m and profits of £3.9m.