The £23bn wealth manager made an all-cash offer for S&W, according to Sky News, disrupting a planned £2bn union with Rathbones that was expected to be announced within weeks.
Last week, Rathbones confirmed that it was in exclusive talks with Smith & Williamson to discuss the possibility of creating a £56bn entity via an all-share merger.
It is understood that Tilney did approach S&W with an offer after Rathbones confirmed its merger plot but had not yet met to discuss the proposal with the target firm.
City sources also told Sky News on Tuesday that S&W’s management team headed up by David Cobb and Kevin Stopps expressed a desire to pursue a deal with Rathbones over Tilney.
Tilney has been highly acquisitive over the last 12-months, despite insisting it would be concentrating more on its organic growth phase.
Two of its most recent purchases, Ingenious and Towry, helped Tilney reach £22.4bn assets under management for the year ended 31 December 2016.
If agreed upon, the Tilney/S&W merger would create a company with approximately £41.2bn AUM, about £15bn fewer assets than the Rathbones/S&W alliance.
Tilney declined to comment on the rival bid for S&W.
