News of FTSE 100 takeovers naturally hit the headlines, but the FTSE 250 is actually the prime hunting ground for corporate bids and private equity deals.

Why? These mid-cap UK shares are smaller and have lower market caps than Footsie-listed companies. And because they receive less attention from retail and institutional investors, many of them are massively undervalued.

This can leave an enormous opportunity for share pickers to exploit. Buy today, and potentially make a huge profit when a takeover approach comes in. But which FTSE 250 shares could be key targets for overseas suitors? Here are two possible contenders.

A top recovery play?

Greggs (LSE:GRG) was once considered one of the FTSE 250’s hottest growth shares. But slowing sales during the cost-of-living crisis have put paid to that, with like-for-like revenues now growing at low-single-digit percentages. A subsequent re-rating has seen the company’s stock price slump.

Its price-to-earnings (P/E) ratio is now 15 times, below the 10-year average of 23-24. To me, this smacks of exceptional value. Greggs is an iconic food retail brand with a vertically-integrated model, giving it significant scale and competitive advantages over rival companies. These include greater control over costs and product quality.

And though it’s encountered trouble more recently, the baker’s long-term earnings outlook remains as robust as ever. Most significantly, it’s built its logistics and manufacturing capabilities to potentially supply “up to 3,500 shops in the future“, up from almost 2,800 today. Expansion is also now being focused on more lucrative travel hubs and not the underperforming high street.

Given its huge recovery potential, I think Greggs could be the FTSE 250’s next big takeover story.

Doctor in the house

Dr Martens (LSE:DOCS) shares have tanked 80% over five years, leaving another compelling value opportunity to explore. The footwear manufacturer was arguably overvalued when its shares floated on the London stock market in 2021. This left it a prime target for a share price correction as its sales in the US disappointed.

Yet, Dr Martens remains an undisputed British icon with significant international potential. Products like the ‘1460’ cherry red boot are as beloved as they were when first introduced in 1960. This eternal appeal could make the company a hot target for a major luxury goods player, for instance. And particularly as steps like reducing discounting and expanding its ranges are showing early positive signs, helping the business move back into profit last year.

Today, Dr Martens shares trade on a forward price-to-sales (P/S) ratio of just below 1. That’s well below a range of 2-3 that heritage footwear brands tend to command, and in my view makes it a white-hot candidate for a takeover approach.

Two FTSE 250 stocks to buy?

Purchasing UK shares with buyout potential can lead to big profits, with successful bids often commanding premiums of 20% or more. But, of course, takeover action is never guaranteed. And even if a bid emerges, investors can still end up losing money.

With these FTSE 250 stocks, key risks include persistent consumer spending weakness and rising costs. Yet, I believe both of these companies could deliver strong returns for investors. Even in the absence of any takeover activity.

Should you invest £5,000 in Dr. Martens Plc right now?

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Royston Wild owns shares in Greggs.