Aukett Fitzroy Robinson's SMC merger plan hits the ropes

Aukett Fitzroy Robinson's plan to merge with rival architect group SMC evaporated as soon as SMC produced its interim results a few weeks ago, the surprise being that SMC had dived seriously into the red.

A source said: "Aukett said the terms had to be renegotiated as a result of that, but SMC didn't want to hear. There is still no forecast in the market for what SMC is expected to report in the full year, with even its own brokers having withdrawn its forecast."

The proposed merger would have created an architectural practise of major standing: number 1 in Europe and within the top 5 globally.

Nicholas Thompson, chief operating officer at Auckett, said: "It's a shame but I run a public company. It would have been quite a good business deal for the long-term.

"Geographically there is virtually no overlap in the UK and it would have given us a position in new market sectors. I've known SMC for a long time and have always had discussions with Stuart McColl [the group's chief executive until recently]."

Aukett has started flying thanks to the injection of new management, the result of Fitzroy Robinson reversing into the Stock Exchange-quoted Aukett in 2004. With Thompson at the helm, Aukett has subsequently moved out of loss and into profit.

Brokers forecast turnover rising by £4m to £20m in the current year, with Aukett's pre-tax profit rising threefold to £2.3m.

The projected profit figure for the following year is higher again, at £3.1m.

SMC plunged into loss in the first half of 2007, announcing that a turnover of £21m had left it in the red to the tune of £4.5m.

"Its market capitalisation has dropped from £95m to just £7m and it has debts of £20m," said the source. "Both sets of employees are talented but one team is led by a chief executive who knows how to collect profit from those skills. If the deal for SMC had gone through, he would have applied his management skills to their technical inputs."

SMC, created by McColl, had grown very quickly. He might now have gone from head office, but McColl still owns 18% of the group's shares. He is thought to be behind the attempt to take the company private with the backing of a private equity fund.

The source added: "Aukett walked away from the deal because SMC valued itself at more than it was worth."