Riverdeep's founder and largest shareholder, Mr Pat McDonagh, has thrown his weight behind chairman and chief executive Mr Barry O'Callaghan in his bid to take the company private.

Riverdeep said last night that it had been advised that Mr McDonagh, who owns nearly 21 per cent of the company, was acting with Mr O'Callaghan in relation to his bid to stage a management buyout of the company.

His involvement greatly improves Mr O'Callaghan's chances of success. Without the support of such a large shareholder, any bidder would struggle to gain the necessary support.

Mr O'Callaghan holds around 4.5 per cent of Riverdeep shares so, between them, the two men control more than 25 per cent of the company.

Riverdeep shares were not affected by the news, which was released after the stock market closed last night. They ended the day unchanged at €1.25. However, analysts believe any offer will have to be pitched well above that level if it is to win the support of the company's shareholders.

These include institutional investors such as Bank of Ireland Asset Management and Capital Group and investors like Reed Elsevier and IBM, which retained around 4 per cent of the company after selling a third of its stake at €2.23 earlier this year. Analysts believe that deal should provide a benchmark for any bid.

Mr McDonagh, who trained as a primary school teacher, is a multi-millionaire as a result of his involvement in a number of hi-tech companies. In 1983, he set up CBT Systems, which later became SmartForce, making €39 million when the company floated on the Nasdaq 12 years later. He made another fortune when Rapid Technology Group floated on the Developing Companies Markets in 1997.

He then turned his attention to Riverdeep, becoming a dollar billionaire when it listed on the Irish Stock Exchange and the Nasdaq in March 2000 at the height of the dotcom boom. The company, which floated at a price of €3.48 in Dublin, gained 164 per cent in its first day's trading to €9.20 but quickly fell back from those heady levels.

Mr McDonagh's 20.86 per cent stake in Riverdeep is held either directly or through Lifetime Learning, a company owned by a trust established for the benefit of him and his family. He took €146 million out of the company in June last year when he reduced his holding from 38.7 per cent to 24.4 per cent.