The first round of bids for UK discount retailer Matalan is expected by the end of next week, according to a source close to the process, in what may be one of the biggest tests of improved sentiment in the private equity market.

The source said that firms are expected to bid just under £1.5bn (€1.6bn) for the deal, which would make it the second largest buyout this year, according to data provider Dealogic. It would rank behind buyout firm CVC Capital Partners' €2.1bn acquisition of the Central and Eastern European assets of drinks group Anheuser-Busch InBev last month.