Dawsons and Penningtons have confirmed that they are in advanced merger discussions with a view to creating a stronger and more profitable combined entity.

Lincoln's Inn firm Dawsons is known to have been in the market for a potential merger partner since last year, with a potential tie-up with London firm Fladgate failing to materialise after discussions which began in late 2010.

In a statement, Penningtons confirmed the Dawsons talks were ongoing. "These discussions have so far been constructive but are still ongoing. It has been agreed by both firms that they should be undertaken on a confidential basis, and for this reason we are not currently in a position to make any public comment on their likely outcome," it said.

"Part of our growth plan is to consider possible merger partners. We have been impressed by Dawsons' lawyers – their practice would be a good cultural and strategic fit with our own, complementing our existing strengths."

News emerged last month that the merger talks between Dawsons and Fladgate had broken down, with Dawsons confirming at the time that it was in ongoing talks with other firms.

Around the same time Dawsons also offered staff the option of moving to a four-day week in return for a reduction in pay.

Dawsons managing partner Martin Codd stated: "Like many other law firms at this time we are facing a challenging economic climate and we are taking the necessary steps to ensure the firm remains strong and profitable."