Allen & Overy (A&O) and Singapore leader Allen & Gledhill have called off discussions about a potential tie-up between the two firms.

The firms announced that they are no longer in talks earlier this afternoon (26 March), with a spokesperson stating discussions had ended because they could not reach an agreement that was satisfactory to both parties.

A&O confirmed it was in discussions with Linklaters' former joint venture partner about a potential merger or alliance in November last year, with Linklaters formally terminating its venture earlier this month.

A tie-up with 312-lawyer Allen & Gledhill, the second-largest Singapore law firm by headcount, would have been a powerful addition to A&O's existing Singapore practice, which comprises 60 lawyers, including eight partners. The firm practices both foreign and local law on the ground in Singapore, after becoming one of only six international firms to be awarded a Qualifying Foreign Law Practice (QFLP) license when these were rolled out in 2008.

A spokesperson for A&O said: "We have concluded our discussion with Allen & Gledhill on a proposal for an alliance or combination between the two firms. As a result both parties have agreed not to proceed. We have had an office in Singapore for almost 20 years which now has around 60 lawyers practising international as well as Singapore law. We continue to see that office and the South East Asia region as strategically significant".

The Singapore firm had 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.

News of the end of the discussions between A&O and Allen & Gledhill comes after the Singapore Ministry of Justice moved to open up the local legal market to allow overseas law firms to share profits with local firms. However, while allowing mergers to take place, foreign firms will not be able to hold an equity stake of more than 33%.