Discussions between the two legal outfits are at an early stage, but should they merge, the consolidated firm is expected to generate annual revenue of $625m (£405m).
Currently the firms are undergoing due diligence with expectations that a decision to merge will be brought to a partnership vote before the end of the year.
Hammonds managing partner Peter Crossley said a merger with Squire Saunders would help the firm to meet its long-term growth strategy.
He said: “Operating as one firm around the world is a foundation of the Hammonds culture which is shared by Squire Saunders.”
Senior management at both law firms notified partners yesterday of thier intentions to join forces. Hammonds needs 75 per cent of its partners to vote in favour of the merger to go through, while Squire Saunders needs support from two-thirds of its partnership.
Should the merger go through, it will mark the third significant trans-Atlantic tie-up in the legal sector this year.
In May, City based law firm Lovells officially merged with Washington’s Hogan & Hartson, while Denton Wilde Sapte announced in the same month its plans to merge with Sonnenschein Nath & Rosenthal.