The independent governing bodies of both organisations agreed that a joint Project Steering Group would be formed to progress a merger proposal.
Senior leaders from Bilborough Sixth Form College and DCG met recently and agreed the timeline for a due diligence process to now be progressed.
A merger proposal will be prepared which will be subject to consultation with all stakeholders from mid-March 2018.
Merger discussions follow the report and recommendations of the Derby, Derbyshire, Nottingham and Nottinghamshire Area Review published in August 2017.
This process is intended to ensure that the further education sector has a strong and sustainable future in terms of efficiency of operation, quality of provision and the responsiveness of courses to the needs of individuals and employers.
In line with the recommendations, Bilborough Sixth Form College has since been investigating potential partnerships to better secure its long-term financial position.
The preferred partner was DCG which includes four college campuses – each with their own identity and specialisms – and has extensive experience of successful mergers since its formation in 2002.
DCG also works with around 3,000 employers through apprenticeship, corporate training and an innovative programme to bridge the gap between education and employment which was acknowledged as 'Outstanding' by Ofsted.
Bilborough Sixth Form College Principal Chris Bradford explained: "Having investigated several different options, including academisation, we approached DCG and were impressed that the organisation understood what we as a sixth form college do and what makes us distinctive.
"Our shared vision is that by joining DCG, we will have greater financial sustainability whilst still retaining our identity.
"Our discussions have very much focused on the opportunities to achieve long-term sustainability and growth for Bilborough and DCG. We can see that sharing good practice and capitalising on our respective strengths will lead to benefits for everyone concerned.
"The start of merger discussions is therefore a positive step forward and we look forward to working with our counterparts at DCG in the coming months to progress this shared vision."
DCG CEO Mandie Stravino continued: "Following the Area Review, we had not been actively seeking a merger but were interested to start discussions with Bilborough Sixth Form College following their approach.
"We both share many synergies – not least a 'Good' grading by Ofsted and a reputation for quality further education provision for our learners and communities.
"This is the start of a year-long process which will include a detailed due diligence process and extensive consultation amongst a wide range of stakeholders.
"The early discussions are encouraging that this merger would provide mutual benefit for both organisations and particularly for our current and future students, staff, local communities and regional employers."