Cenkos Securities, the stockbroker owned by City veteran Andy Stewart, is in talks with its smaller rival Arden Partners about a possible £30m takeover.

Stewart has been in on-off discussions with the firm for several months, according to market sources. The talks accelerated after Stewart failed in his audacious £1.5 billion bid for Close Brothers earlier this year.

The deal would be structured as an all-paper offer that would include substantial lock-ins for Arden’s senior staff, including its recently appointed chief executive, Jonathan Keeling.

It is understood that there would be no staff cuts if the deal went through.

Analysts say the deal would bulk up the small-cap sales and trading arm of Cenkos, more than doubling its revenues inthat segment of the market.

Arden, formed from the remnants of the Birmingham-based broker Albert E Sharp, would also give Cenkos a new base outside London.

The move is the latest sign of consolidation among the City’s small and mid-cap stockbrokers. A drought of flotations on London’s Alternative Investment Market has hammered the revenues of all the smaller firms.

WH Ireland has rebuffed a takeover approach from Blue Oar, which emerged after a consortium of new investors moved to take control of the company. Evolution Group has held talks with Panmure Gordon about a possible deal, although the negotiations – codenamed Project Watson – fell apart six weeks ago.

It is understood that a number of investors with shareholdings in both brokers, including the University Superannuation Fund and Lansdowne Partners, have beenencouraging Evolution to make a fresh approach.

However, Tim Linacre, the Panmure chief executive, who owns 5% of the shares, is opposed to a deal. It is understood Evolution offered Linacre a seat on the board in an attempt to persuade him.

Panmure’s three biggest shareholders – Lazard, HBOS and Farhad Moshiri, the Iranian investor who also has a stake in Arsenal FC – are all said to support Linacre.

Some shareholders have told Linacre that they would back him to do more deals.

Linacre has held discussions with Execution, the boutique sales and trading house, according to market sources. HBOS also holds a 10% stake in Execution. It is understood that no deal is imminent, however.

A number of smaller stockbrokers are also rumoured to be looking for buyers as trading conditions continue to be tough.

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