The negotiations follow last month's annual meeting, at which shareholders STG Holdings and Fairfax called for a vote on the appointment.
The shareholders also proposed that four new directors join the board. These include former MDA chief executive Robert Boot, former J Sainsbury construction director Charles Johnston and David Somerset, managing director of rival QS Haley Somerset.
A reconvened annual meeting is due to take place on Friday to decide on the fate of branding and marketing expert Headlam, who took the reins at MDA in October.
The shareholders were due to meet MDA board directors on Wednesday to discuss their plans for the top-15 QS.
MDA chairman Simon Metcalf acknowledged that the two parties were holding talks. He said: "We have talked quite a lot in the last
24 hours. I am quite encouraged by their tone and am looking forward to the meeting."
STG boss Stefan Allesch-Taylor said he was unable to comment until after the reconvened meeting.
Metcalf sent a circular to shareholders on Tuesday, defending Headlam and asking for their support in reappointing her.
The letter said: "It is the unanimous and unreserved view of your directors that Ms Headlam should be reappointed as a director.
"The issue before shareholders is essentially a choice between confirming Elaine Headlam's appointment to the board or giving control of the board to the requisitionists."
Headlam, recently profiled in Building (16 November, page 30) filled the post left by former chief executive Richard Houghton, who left in 2000. Her appointment coincided with MDA's acquisition of Headlam's branding and design firm X-BBE Consulting.
Headlam said she would reveal a new strategy for the firm, which employs 200 staff in the UK. She said: "It's about evolution, not revolution. We want to maximise value and minimise risk. We want to create opportunities."
MDA revealed its latest results at the annual meeting. The firm's pre-tax profit stood at £141,000 for the year to 30 September 2001 compared with a loss of £2.3m for the 15 months to 30 September 2000.
Turnover was £12.5m, compared with £16.3m for the previous period.