Linklaters and Allen & Gledhill are to officially end their alliance as the Singapore firm continues its tie-up talks with magic circle rival Allen & Overy (A&O).

The firms have reached a decision to formally terminate the joint venture, which has been in place since 2000, over the last few days, with one Linklaters partner suggesting the venture will be wound down before the end of the financial year in April.

The decision comes as Allen & Gledhill, which with 312 lawyers is the second-largest law firm in Singapore by lawyer count, continues its discussions with A&O about a potential merger. The UK firm confirmed the talks in November last year.

The Singapore firm initially asked Linklaters about forming a closer relationship, but the firm declined due to a lack of demand for Singapore law advice from its international clients, opening the door to A&O.

Linklaters, which currently has about 40 lawyers including seven partners practising foreign law on the ground in Singapore, now plans to set up informal referral links with several local law firms over the coming months.

A&O and Allen & Gledhill are still working out details of their proposed union, which the firms are hoping could take the form of a merger but which could initially be structured as an alliance.

Last month Singapore announced plans to open up its legal market by allowing overseas firms to take stakes in local law practices and share profits, with overseas law firms able to take a profit and equity share in a Singapore firm of up to 33% in the event of a tie-up.

The Singapore Ministry of Law is currently considering an outline proposal by A&O and Allen & Gledhill detailing how the union could work.

News of the end of the Allen & Gledhill joint venture comes a month after Linklaters partners confirmed that the City firm is holding discussions with Australian leader Allens Arthur Robinson (AAR) about a strategic alliance.

The pair started discussions about a tie-up last year, with several partners stating that the firms were pursuing an alliance rather than a merger to avoid problems associated with the disparity in profitability between the UK and Australian firms.

AAR, which is an established referral partner of Slaughter and May, posted revenues of $459.5m (£291m) in 2010 with profit per equity partner (PEP) of $1.1m (£696,000), according to the most recent global 100. Linklaters' revenues for 2010-11 stood at £1.2bn alongside PEP of £1.225m.

Linklaters declined to comment.

For more analysis, see Crunch time for Singapore as Asia hub as A&O enters merger talks with local leader.