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E-business consultancy Mercatela has been taken over by one of its chief backers, resulting in the closure of its Hong Kong branch and the loss of 50 jobs.

'The decision has been made in the context of an overall restructuring of the group,' said Alfredo Lobo, chief executive of venture-capital firm and lead investor NetworkAsia.

Mercatela, launched early last year, has about 110 remaining staff members based in four other offices, in Kuala Lumpur, Singapore, Taipei and Tokyo.

The firm, which provides Internet and business services to bricks-and-mortar companies, was founded by Jordi Argente and Tony Melloy.

Mr Lobo said: 'We made a determination of the mismatch between revenues and expenses in Hong Kong [and found it] was not justified.'

The Hong Kong office had been acting as the regional overhead, with all the obligations and costs, he said.

NetworkAsia, which is based in Hong Kong, had been an initial backer of Mercatela and poured more money into the firm, although Mr Lobo declined to say how much.

Corporate restructuring firm Baker Tilly was appointed as provisional liquidator late on Tuesday afternoon.

Rupert Purser, managing director of Baker Tilly, said that at this stage the only branch in any formal winding-up programme was Hong Kong. Mercatela had 'just run out of money in Hong Kong', he said.

The company, which had been searching fruitlessly for additional financing, had been in discussions with NetworkAsia for at least six months, Mr Purser said.

Mr Lobo added that the venture-capital firm had provided bridge, or ongoing, financing until it had assumed a controlling stake in Mercatela through a series of deals.

The global implosion of the technology industry has scared away most investors, both professional and personal.

Many Hong Kong companies depending on Internet-related revenues have been struggling to find financing or merge with other companies in attempts to cope with their cash-flow problems.

Some have run out of money and been forced to close down.

Rumours that Mercatela was having problems had been around for months, even though the company seemed to be constantly hiring people and letting some go.

About six weeks before the news of the SAR closure, Mr Melloy had said that each of the branches was carefully assessing the staff mix to take care of markets in each city.

The Hong Kong branch had well-appointed offices on the 26th floor of the Citic Tower in Central, but Mr Melloy also said the company had received a good deal on rent.

Mr Melloy said he was not able to comment on the present situation.

Mr Lobo said the co-founders would help the provisional liquidator, but said their future roles in the company were as yet undetermined.

Mr Purser said Baker Tilly had the task of trying to find a buyer or several purchasers to support clients, and clean up any debts within the next two weeks. Mercatela's Hong Kong employees are owed some wages.

'We are in discussions with parties who are looking at possibly buying or investing in the business in Hong Kong,' he said.

Mr Lobo said he expected the rest of the offices to become cash-flow positive in the next three to four months, starting with Singapore.

Mercatela's client list includes Hutchison Whampoa, British Airways, British Telecom, Sun Microsystems, Procter & Gamble Taiwan, and Sony Music Asia.

The clients received notification this week so they could appraise the situation, Mr Purser said.

Six weeks ago, Mr Melloy said the company had revised its projections from its launch.

Last year, it had aimed to capture 1 per cent of the region's US$9.5 billion Internet professional-services market in two years, based on International Data Corp predictions, giving it a target of about US$95 million. However, company executives had expected to achieve half of that, he said.

lydia@scmp.com



Backer takes over e-business consultancy