The Pozzo family, the owners of the Serie A club Udinese and the Spanish club Granada, have agreed "in principle" to buy Watford.
The Italians have also hinted that the former Chelsea striker Gianfranco Zola could be in line for a role at the Championship club.
"Zola enters in the project, but it's premature to talk about it," said Gino Pozzo, who is set to become chairman. The current owner, Laurence Bassini, bought Watford 15 months ago.
A club statement read: "The board of directors, acting on behalf of Watford Football Club, is pleased to confirm an agreement has been reached in principle for the transfer of ownership to the Pozzo family. Both parties have agreed initial terms."