F&C, which employs more than 100 people in the Scottish capital, said BMO had made an indicative offer of 120p per share.
This is a 28% premium to its closing price on Friday and led to a 22.9p rise in its share price to 116.4p, a five and a half year high.
F&C, which can trace its roots back to the launch of the Foreign & Colonial Investment Trust in 1868, said it had indicated to BMO that it was likely to recommend the offer, and talks are at an advanced stage. For BMO a deal would more than double the size of its global fund management arm.
US-based financier Edward Bramson stood down as F&C's chairman in August having led the company since a boardroom coup in February 2011.