Arsenal were linked with a late transfer deadline move for Schalke midfielder Max Meyer.
The German has impressed in a sitting midfield role this season, and the Gunners were keen on the 22-year-old as a cut-price/long-term replacement for Santi Cazorla.
His contract expires in the summer and there are suggestions that Gunners' transfer chief Sven Mislintat could revisit his interest.
However, with Schalke having offered a new deal, Arsenal face a battle.
And now Mundo Deportivo reports that the Germans are now facing an even bigger threat: Bayern Munich.
Die Roten have already signed Meyer's teammate Leon Goretzka on a pre-contract agreement ahead of next term.
But now a switch for Meyer could also be on the cards - meaning Arsenal have to look elsewhere.
Wenger says January arrivals have dented Laca's confidence
Arsene Wenger has admitted Alexandre Lacazette is suffering from a crisis in confidence after Pierre-Emerick Aubameyang took his place.
Striker Lacazette has struggled to adapt to English football since his £52million arrival last summer and wasted two late chances to steal a point for Arsenal in Saturday's 1-0 North London derby loss to Tottenham.
Aubameyang now looks set to become top dog up front at the Emirates.
“Maybe the confidence is not at its highest because he has seen a competitor coming in," said Wenger.
“But, for him, one against one with the keeper, he is still a good goal-scorer. He has gone through difficult periods before.
“He works hard in training, works on his finishing. I don’t know what happened, did he not touch the ball well? It can happen, it is a fraction of a second. But he created two chances. That is a quality as well.
“He will score goals. He is a goal-scorer, he scored goals in his whole career. He will score again.”
Opinion: Arsenal will be in Spurs' shadow until Wenger leaves
The most telling reflection of where the real balance of power lies in north London was not the result at Wembley, writes John Cross.
Put simply, 1-0 winners Tottenham have got bigger things to worry about now than finishing above Arsenal.
Spurs are in the top four, have a glamorous Champions League tie with Juventus on Tuesday night, and are still in the FA Cup.
The Gunners, meanwhile, can see this season's Champions League places slipping further away. They are seven points behind Tottenham now and still showing all their old frailties, despite expensive new signings last month.
Spurs have finished above Arsenal just once during Arsene Wenger’s 22-year reign but you would have to be dim not to recognise which north London club is in the ascendancy and which is in decline.