This worked fine for me until I tried adding a AutoCompleteExtender and needed to declare a method in code behind with the attributes
[System.Web.Services.WebMethodAttribute(),System.Web.Script.Services.ScriptMethodAttribute()]
That's when I came across the following error:
The type or namespace name 'ScriptManager' does not exist in the namespace 'System.Web.UI' (are you missing an assembly reference?)
Having merged the web.config files I assumed I should not be getting the error. However, what I had failed to do was merge the .csproj files. Apparently some references are in the .csproj file. Mainly, the reference to the System.Web.Extensions.
Adding a reference to the System.Web.Extensions should fix the problem.