Liverpool boss Brendan Rodgers has indicated he sees signing Mario Balotelli as a risk but one worth taking.
Manchester City captain Vincent Kompany has signed a new five-year contract with the Premier League champions, the club announced.
Frank Lampard will join up with Manchester City next week as he begins a loan spell with the Barclays Premier League champions.
Former Liverpool manager Graeme Souness has warned the club against signing Mario Balotelli, describing the move as an "enormous gamble".
AC Milan striker Balotelli is reportedly closing in on a transfer to Liverpool as Reds boss Brendan Rodgers looks to replace the goals of Luis Suarez, who joined Barcelona earlier this summer.
The #16million move for the controversial 24-year-old former Manchester City player is seen as something of a coup by many, but Souness believes it is a risk not worth taking.
Writing in the Sunday Times, he said: "It's an enormous gamble by Rodgers, a gamble I don't think he needs to take because he has a very strong group of players.
"The harmony looks good but he may find, like every previous manager of the Italian, that he will spend more time talking about Balotelli, spending time with him and defending him, than he will the rest of the group put together."
Souness, who managed Liverpool to FA Cup glory in 1992 and has also been in charge of Newcastle, Blackburn, Rangers and Southampton, went on to say that he would not sign Balotelli if he was still in the Anfield hotseat.
He added: "At times Balotelli doesn't seem to enjoy football. Big teams can do without people who pick and choose when they will have a go. It's a high-risk signing. I wouldn't want him."
Balotelli is a proven performer, but the baggage that comes with him is considerable.
His spell with Manchester City from summer 2010 to January 2013 was a whirlwind one, with occasional sparkling performances interspersed with volatility on the field and erratic behaviour off it.
He scored 30 goals in 80 appearances for the club and set up Sergio Aguero's stoppage-time goal against QPR which saw them crowned 2012 Barclays Premier League champions - their first league title since 1968.
In a press conference today, Reds manager Brendan Rodgers wouldn't talk about signing Mario Balotelli.
But he did say that he would never sign a player if he felt they would disrupt the atmosphere of the dressing room.
Manchester City's boss today said he thinks ex-City striker Mario Balotelli would be a good signing for Liverpool.
Talks between Mario Balotelli's representative and Liverpool are understood to be 'progressing well' as the club seek assurances about the player's behaviour - although any deal will not be completed in time for him to feature against Manchester City.
Reports have suggested the Reds have agreed a £16million fee with AC Milan for striker Balotelli's proposed move to Anfield.
And while Liverpool have not commented, Press Association Sport understands productive discussions involving Balotelli's agent and the club took place in England on Thursday and are continuing on Friday.
A key aspect of those discussions is believed to be the Merseyside outfit's desire to obtain some kind of guarantee about the discipline of the mercurial 24-year-old Italy international.
Balotelli himself remains in his homeland for now and will not be able to take part in Liverpool's Barclays Premier League clash with his former side City at the Etihad Stadium on Monday as the transfer would need to be completed by midday on Friday for him to be eligible.
Liverpool FC are believed to have agreed a fee of £16m with AC Milan.
And Balotelli could arrive on Merseyside just in time for a trip to the Etihad Stadium and a game against his old club, Manchester City.
So, after losing Luis Suarez, are the fans happy to bring in another controversial character?
We sent David Chisnall to find out.
Milan said on their website on Thursday afternoon that Balotelli had bid farewell to his team-mates before leaving training.
The statement on the club's website read: "Mario Balotelli left Milanello's sporting centre at 13.30 (local time), after saying goodbye to his team-mates. "Before leaving the premises, the striker has said goodbye to members of Milan's press office."
Balotelli, quoted by Sky Italia, said: "It's my last day at Milanello (club training ground)."
Liverpool are considering a move to bring AC Milan striker Mario Balotelli back to the Barclays Premier League.
Reports linking the former Manchester City star with the Anfield club earlier this summer came to nothing but Press Association Sport says the Reds have now declared their interest in the former Manchester City star.
Any deal for the 24-year-old would be a permanent transfer, with a loan arrangement thought to be off the table. Balotelli enjoyed a whirlwind stint at City between 2010 and 2013, winning an FA Cup and Premier League title with the club but gaining notoriety for his unpredictable off-field behaviour.
His tendency to appear in the gossip pages led to a famous goal celebration when, after scoring against neighbours Manchester United in October 2011, he lifted his shirt to reveal a slogan that read "Why Always Me?".
Balotelli eventually left England for Milan when then City boss Roberto Mancini decided to cash in on the eccentric forward.
Liverpool boss Brendan Rodgers has experience with difficult characters, of course, having coaxed the best out of Luis Suarez before his departure for Barcelona.
Suarez's disciplinary problems - including biting Chelsea's Branislav Ivanovic on Rodgers' watch - as well as a publicly stated desire to leave in 2013 caused headaches for Rodgers but the Uruguayan thrived on the pitch.
He swept the board at the end of season awards and the #65-75million Liverpool eventually banked from Barca largely funded a squad-building spending spree this summer.
But Rodgers remains in the marker for a marquee striker to share the load with Daniel Sturridge, with Rickie Lambert currently the only frontline support.
Monaco's Radamel Falcao is another big name who has been linked but Balotelli, who has been valued at around #17.5million, would be a more attainable target.
He scored 16 times for Milan last season, as well as grabbing Italy's winner in the World Cup opener against England in Manaus.
Milan club administrator Adriano Galliani said on Wednesday they had yet to receive an offer from the Reds for Balotelli, but on Thursday the Italian club's TV channel reported that the Rossoneri were in negotiations with the Premier League outfit over the striker.
Milan president Silvio Berlusconi, meanwhile, said previously he came close to selling Balotelli - who is under contract at the San Siro until June 2017 - to an unnamed English club before the World Cup.
It has been confirmed that striker Edin Dzeko will be staying at Manchester City for another four years.
The captain of Bosnia Herzegovina has signed a contract extension that will keep him in a blue shirt until the summer of 2018.
This comes after David Silva, Sergio Aguero and Vincent Kompany also committed their long term futures to the club.