IN May an audience of art investors gathered in a salesroom at the Rockefeller Center in Manhattan for the auction of Lucian Freud’s Benefits Supervisor Sleeping.

Freud’s 1995 painting of a 20-stone naked woman sprawled across a sofa was tipped to become the most expensive work ever sold by a living artist. The Christie’s auction did not disappoint, as Roman Abramovich, the Russian oligarch and Chelsea football club owner, smashed the record with a final bid of $34m (£17.2m).

The auction had implications outside the art world. It was one of the first signs that the private £2 billion property-to-financial-services empire Dawnay Day, one of Britain’s largest privately held groups, was unravelling.

Dawnay Day’s chairman, Guy Naggar, was the owner of the painting and the sale was a desperate attempt to raise cash without making it known that his business was in trouble.

Naggar, 67, and his business partner, Peter Klimt, 62, built up the complex conglomerate over nearly 20 years. Now the credit crunch had taken its toll and the two entrepreneurs were facing mounting problems. An insatiable appetite for growth had taken them one step too far.

Naggar bought the company for £3m in 1981, using his own inheritance money. Born in Cannes, the Frenchman had spent his early years at the Ecole Centrale Paris where he studied engineering. He later trained as a merchant banker before moving to London in his twenties.

Naggar met Klimt, a Mumbai-born tax lawyer, in the 1980s. Their friendship evolved into a business partnership. Klimt joined the company’s board in 1992 and together they embarked on a programme of aggressive expansion that would take them all over the world.

In the beginning Dawnay Day focused its attention on two areas: commercial property, under the guidance of Naggar, and financial services, led by Klimt.

The group moved into overseas markets in the early 2000s, starting in Germany, and began to expand further with the listing of three separate vehicles on London’s Alternative Investment Market (AIM): Carpathian invested in central and eastern European commercial property, Sirius focused on flexible workspace in Germany, and Treveria on German retail assets.

As Dawnay Day expanded, so did its complexity. Naggar and Klimt moved into stockbroking, property finance, and insurance broking. A wealth-management business was set up to serve India’s growing middle classes, and Dawnay Day became one of the biggest providers of Islamic finance to businesses in the Middle East.

It spent £130m on 47 apartment blocks in the run-down but “up-and-coming” New York district of Harlem, the foundation for a $5 billion US property business.

Naggar once said: “People say they don’t understand us . . . there are two guiding principles . . . one is to back talent . . . two is to buy hard assets with deep value. We also like to have our own money in funds. We like to feel we’re at risk.”

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