A dawn raid is the purchase of a large shareholding in a target company in a very short time, prior to the announcement of a hostile takeover bid.
These are called dawn raids because they are often carried out at the start of a trading day. The aim is to build as big a stake as possible without the market or the management of the target noticing.
The substantial acquisition rules formerly imposed by the Takeover Panel have now been dropped so substantial dawn raids are once again permitted. A bidder can now purchase up to 30% of the shares in a company as fast as shares can be bought. Once the bidder (or concert party) has a 30% stake they must announce the bid.
The problem with allowing a bidder to build up such a large stake (and the reason lower limits were formerly imposed) is that it may put a bidder in a position to block rival bids before its own bid is made public.
However, allowing substantial stakes may encourage more hostile bids, which will be good for shareholders. One big advantage is that, with a 30% stake, the would be bidder can block attempts at poison pills and other tactics that try to make a bid unpalatable.