United is said to have presented Arsenal with a bigger offer than City, and although Mourinho claims it was not in the club's plans to sign players in January, he acknowledged that fantastic opportunities are worth pursuing whenever they present themselves.
United boss Jose Mourinho said Sanchez is a "phenomenal player" on Friday.
Reflecting on United's reported interest in the former Barcelona forward, Wenger added: "A bidding war is always beneficial to the club who can take advantage of it". O'Neill had been expected to extend his contract with the Republic of Ireland after Keane had persuaded him to stay on, however a return to top flight management might tempt the pair of them to come to England.
United would have no problem in meeting Arsenal's demands and similarly would have no qualms paying the agent's fee having handed Mino Raiola £41m when they secured the then world record purchase of Paul Pogba.
Wenger said he does not want the 28-year-old to leave, but conceded he can not guarantee the forward playing time and an unlikely route into Gareth Southgate's England squad for the World Cup.
Speaking of Sanchez's possible arrival, reports have suggested that Henrikh Mkhitaryan could be headed the other way in a player plus cash deal.
"So that slowly is killing the transfers, and you will have more and more players going to the end of their contract because of that". That makes you a better player. Gabriel Paulista and Alex Oxlade-Chamberlain were both sold in the summer, Francis Coquelin left for Valencia this week, while Theo Walcott and Mathieu Debuchy could both be headed for the exit this month as well.
Wenger says there are two major factors that will decide whether or not they can get the other two players to renew their deals- earning money and winning trophies.
Wenger also confirmed that he has no intention of leaving himself, amidst continuing question marks over his own position. But Wenger expects to stay until at least until 2019, when his current deal expires. He may yet walk away, but has no intention of doing so before the season is over. "Never. Why should I change?" I am not talking about the clubs, Gary.