Aukett Fitzroy Robinson (AFR) is in discussions with the troubled SMC Group about a possible merger of the two companies.
In an announcement to the City, AFR advised its shareholders that 'discussions are at any early stage and a final agreement is subject to extensive commercial, financial and legal due diligence'.
The potential move - which comes only months after the resignation of SMC founder Stewart McColl - would mean the fusion of the industry's only two listed companies.
Earlier in the year, trading figures had revealed that up until year ending 2006 SMC had suffered a £1 million slump in profits.
The results prompted a lack of confidence among the group's shareholders, leading to McColl being sidelined from chief executive to deputy chairman, with Rodney Walker taking over the chairman's role.
A subsequent unfavourable trading review resulted in McColl's departure and the admission that the firm would be closing some offices.
From 2005 to 2006, SMC Group acquired nine practices - including Alsop Architects - in an unprecedented display of buying power. However, some companies did not perform as well as others, leading to profit targets plummeting from £7 million to £5 million.
The merger would create a group with some 890 staff with operations in 38 offices across nine countries.by Max Thompson