A senior manager at one of two Scottish universities at the centre of merger speculation has said that joining forces would be "logical".
There has been talk for some time about a merger between Edinburgh Napier University and Queen Margaret University, two of four universities in the Scottish capital.
Last December, Anthony Cohen, principal of Queen Margaret, dismissed the rumours as "rubbish".
However, Professor Cohen is retiring in September and is due to be replaced by Petra Wend, deputy vice-chancellor of Oxford Brookes University. There are suggestions that the change of leadership may bring about a change of attitude.
A member of Napier's senior management team noted that there was "great interest" in what Dr Wend would do, and suggested that a merger was more likely as a result of the universities' respective finances.
Whereas Queen Margaret registered losses of £7.7 million in 2007-08, partly due to its move to an expensive new campus, Napier has net assets of about £60 million.
The Napier source, who asked not to be named, said: "A merger would be a logical development. Together, we would make a larger and better university with more chance of surviving the recession."
The Scottish Funding Council is working with Queen Margaret to resolve its financial predicament. It is thought that one option under discussion is a merger with Napier.
A spokesman for the SFC said: "We recognise that Queen Margaret is facing a difficult situation and that measures need to be taken to address it. The university has a clear understanding of the position and is developing its own proposals of what these measures might be.
"We expect to be able to discuss these with it once the new principal has taken up her post in September."
Times Higher Education understands that the SFC is also looking at the teaching overlap between the two institutions in areas such as health, creative arts and languages.
Both attract a large proportion of their students from the local region - in 2007-08, 54 per cent of Napier's students and 43 per cent of Queen Margaret's were from Edinburgh and the Lothians. They are already partners in some aspects of provision, such as drama.
The head of a third Scottish university said that attitudes to the merger among Queen Margaret's academics were shifting. "There is a feeling that by getting together they might be able to create something that is financially viable," he said. "Staff are coming around to it now."
However, a spokeswoman for Queen Margaret said that the appointment of Dr Wend signalled "our intention to stay as an independent and sustainable university".