According to reports, the beleaguered Royal Bank of Scotland is putting feelers out for potential buyers of its Asian businesses in a bid to shed some of its huge debt. Losses of at least £28 billion are expected to be announced on Thursday.

The bank is understood to have already discussed the sale of its Asian assets with ANZ, the Commonwealth Bank of Australia and Standard Chartered. The idea is to unpick Sir Goodwin’s international expansion and focus on core UK banking activities.

Assets for sale are to include a number of retail banks, wholesale banking operations and wealth management businesses. The problems RBS face are the lack of cash-rich buyers, the plethora of other financial institutions on the market already in Asia (CitiBank, AIG and General Electric are trying to offload their Asian businesses), and the low prices currently being paid for businesses in this sector.

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It has been predicted by business-recovery experts that numbers of insolvencies in the commercial-property market will dramatically increase in 2009.

Begbies Traynor has predicted that 1,600 British property companies could go under this year alone in the onset of the recession.

It has been reported that numerous landlords have asked their shareholders to raise funds, including Land Securities and Hammerson.

Begbies Traynor has identified 304 UK property companies at severe risk of going into administration due to crippling financial difficulties, using its “Red Flag” early-warning system.

The figure is a 65% jump from 185 companies with escalating problems in the third quarter of 2008.

Nick Hood at Begbies Traynor, says: “We’re seeing a build-up of problems as the real economy in which tenants operate continues to unravel. The only upside has been the fall in interest costs. However, this offers little relief to landlords dealing with escalating tenant defaults and unprecedented difficulty in raising or preserving business funding.”

So there we have it! If you are looking for a business to buy, and reckon you can get your hands on the properties cheaply, remember that once the business has gone into administration the properties will be sold by auction.

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Who will buy Friends Reunited and for what price?

ITV bought the site for around £175 million (total including staggered payments up to the end of 2008) back in 2005, and its slow demise has been quite apparent to anyone following the social networking industrys. It tried to target the older demographic of over-30’s, pitching a social network to ‘grown-ups’. But it just hasn’t worked.

Sad really, as it had such a good head start on the competition, which includes Facebook, Bebo and MySpace. In June 2007, unique user figures were at 2.4 million, dropping to 1.4 million by March 2008. We know they will be somewhat higher (in June 2008 the figure was 3.1m), but this is because Friends dropped its subscription model. They were hoping that advertising revenue coming as a result of the higher page impressions would compensate for the estimated £22 million subscriptions revenue (2007 figures).

But significantly higher registrations didn’t eventuate. Plus, they walked into a recession with less advertising dollars at large. They sure do cover the site with ads – last time I looked, I counted 7 on a page. But ads on social networks produce pretty low level returns for most advertisers, and they consequently pay a low cpm. What are the net revenues of Friends Reunited now? Perhaps £10m, and at that level I’d be surprised if anyone were to offer much over £100m for the site unless they had a secret inside edge that eludes the rest of us.

One thing’s for sure, and that is far from reviving ITV’s flagging fortunes, the Friends Reunited investment has hit the media company where it hurts.

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Some of the latest businesses falling into administration are:

The radio station Abbey FM in Cumbria. Staff were asked to leave for good at 3pm on Friday.

Freeman & Proctor Ltd, the Warwickshire-based engineering firm. Makes pipes and tubing for the aircraft industry. PricewaterhouseCoopers (PwC) have been appointed as administrators.

Ffrith Leisure in Denbighshire. It leases Ffrith Beach festival gardens and employs 50 people.

What a day, more news on the insolvency front:

Vantis Business Recovery Services have been appointed administrators of freight forwarder Anglo Overseas. It has 210 staff, but is still operating as a going concern; 70 have been made redundant.

The management company behind UB40, Reflex Muzic, have appointed administrators Bond Partners after the latest albums by the band flopped.

Camden Group, the parent company of fleet services company Camden Fleet Solutions has folded into administration with the loss of 40 jobs. Zolfo Cooper has been appointed to find buyers for the business which is continuing to trade normally.

For details of these and other companies and their appointed insolvency practitioners, please subscribe to the Business Sale Report.

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A new report from PricewaterhouseCoopers (PwC) has highlighted the comparative strength of the UK’s mid-market technology industry, in terms of mergers and acquisitions.

During the current challenging financial environment, technology companies may be better equipped to weather the storm, having learned lessons from their survival of the dot.com crisis. Increasingly flexible business models have enabled technology businesses to move more swiftly in response to changing markets across the globe and, with less exposure to high levels of leverage, the impact of the credit crunch on the sector overall has to date been less pronounced than in many other areas of the economy.

As a result of this resilience, 2008 saw the value of deals involving UK technology firms increase by 10%, with the activity accounting for a third of the 570 completed global technology transactions. One particularly notable deal was Symantec’s purchase of Messagelabs for £397m.
Despite the 10% increase in domestic transaction value, there were 13% fewer deals. Global aggregate deal value also fell 27% over the year, with a deterioration in the number of ‘mega-deals’ worth EUR1 billion or more.

Only ten mega-deals were completed globally in 2008, compared with 19 the year before. Therefore, mid market deals have been left to help the global economy gain strength. “Deals valued between €10m and €250m account for some 94 per cent of global volumes – a clear illustration that technology M&A remains driven by the midmarket heartbeat,” says Andy Morgan, the technology sector leader at PwC.

Asian investors are increasingly looking to Europe, as opposed to the US for their investment opportunities as off-shoring opportunities are growing faster in the UK. The struggling value of Sterling is also adding to the attraction for overseas investors, as well as speculation that the currency’s strength could recover later this year.

In conclusion, PwC’s report does not make a case for liquidity or credit avenues improving this year, but it claims that M&A activity is to strengthen regardless: “Deal conditions and liquidity are unlikely to improve materially over the next six to nine months although we do anticipate an upturn in M&A activity towards the end of 2009.”

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The third quarter of 2008 saw a marked reduction in the number of deals that completed in the UK. However, for those that did, prices held steady. The Private Company Price Index (PCPI) p/e ratio for sales of companies to trade acquirers was 11.5 times, up marginally on the previous quarter’s 11.3 times. Similarly, the Private Equity Price Index (PEPI) p/e ratio was 11.2 times which remained relatively unchanged from the previous quarter’s 11.1 times.

To recap, the PCPI, compiled by BDO Stoy Hayward, tracks the sale prices of large businesses as a multiple of their after tax earnings. However, as owner managed profits tend to be understated to avoid taxation then the multiples will tend to be overstated as the information is gleaned from publicly available information.

By comparison, the FT Non-Financials Index (FTNF) fell 11 per cent this quarter from 12.4 times to 11.0 times, most noticeably hit by the turmoil in the markets caused by the collapse of the banking sector in the second half of September.

Full report available in our subscriber section.

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