The Government has held a beauty parade to find an investment bank to advise it on the part-privatisation of the Royal Mail.

The Department for Business, Enterprise and Regulatory Reform, headed by Lord Mandelson, plans to allow foreign investors to take a stake of up to 33 per cent in Royal Mail – a move that has outraged unions and Labour backbench MPs.

It is understood that Morgan Stanley, Credit Suisse, UBS and Goldman Sachs pitched for the government work yesterday and that Royal Mail will be separately advised by NM Rothschild, its longstanding adviser. Royal Mail has also hired Slaughter and May, the City law firm.

The battle for the mandate will be hotly contested. With lucrative mergers and acquisitions work thin on the ground since the credit crunch, the Royal Mail disposal is one of the few deals of any size around.

The Business Department is expected to announce further details of the disposal process to Parliament in the new year, but may appoint its investment banking adviser before then. The Government must also introduce enabling legisation before it can sell the Royal Mail stake.

However, yesterday’s beauty parade emphasises the speed with which the Business Department intends to push through the sale in the teeth of opposition from the unions and some Labour backbenchers.

TNT, the Dutch postal group, became the front-runner for a new “strategic partnership” with the publicly owned mail business this week after Lord Mandelson welcomed its expression of interest.

It emerged yesterday that CVC would also be interested in bidding. A spokesman for the private equity house declined to comment, but it is understood that CVC will consider a bid even though it has yet to express its interest formally. CVC acquired a 22 per cent stake in Post Danmark from the Danish state in 2005 in a partial privatisation. CVC and Post Danmark then together bought a 50 per cent stake in De Post - La Poste, the Belgian postal service, in 2006. The private equity house could structure a bid for the Royal Mail stake in a similar way, using one of its portfolio companies as a vehicle.

The news of CVC’s possible bid provoked outrage among unions yesterday. A spokesman for the Communication Workers Union told The Times last night: “The prospect of a venture capital group buying part of the British postal service demonstrates the danger of any sell-off.”

The union is opposed to any private sector involvement and is expected to launch a strong campaign with Labour backbenchers in the new year.

It is thought this could be one of the biggest fights faced by Gordon Brown’s administration, and the dispute puts in jeopardy the union’s financial backing of the Labour Party.

Labour also faces opposition from within its ranks. Jim McGovern quit as Parliamentary Private Secretary to Pat McFadden, the Post Office Minister, after the publication this Tuesday of a report recommending an injection of private capital.

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