Merrill Lynch and Close Brothers Corporate Finance are understood to be advising Logica, the UK IT services group, on its merger talks with UK rival CMG, which is being advised by Goldman Sachs.

The two companies are in early-stage merger discussions, according to a joint statement. In addition to offering scope for significant operating cost savings across the combined businesses, a deal could create one of Europe's largest quoted IT services businesses, the companies said in the statement. The resulting business could also be a leader in mobile messaging software.