Market researcher Taylor Nelson Sofres (TNS) said rival GfK has abandoned its offer for the firm, as TNS reported a fall in profits for the first half.
In a statement, GfK said: "The management board, after careful consideration, has concluded that the terms of the financing available did not enable a sufficiently compelling alternative cash offer to be made for TNS that was also economically in the best interests of the GfK shareholders."
Pre-tax profits fell 8.6 per cent from £33.9 million to £31 million as the firm was hit by restructuring costs and the expense associated with the proposed merger.
Excluding these costs, profits rose 13.3 per cent to £41.8 million.
TNS had hoped for a 'merger of equals' with GfK but the termination of talks leaves advertising group WPP the frontrunner in the takeover race.
However, TNS is recommending its shareholders to reject the 268.7p per share WPP offer, which values TNS at around £1 billion.
Shares in TNS are currently trading at 264.75p, a four pence fall from last night's close, on the news.
The board was confident in its full-year outlook, boosted by a strong order book and new clients.
Chief executive David Lowden said: "We have delivered substantial growth in revenue, adjusted operating profit and adjusted earnings per share, and our shareholders will enjoy a 25 per cent increase in the interim dividend.
"Around the world, we continue to win new business and our order book is in excellent shape to reach full year underlying revenue growth of around six per cent."
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