The idea of using bankruptcy as a fresh start has long been a common belief, but not every company can be saved. Recently, there has been a rise in liquidations and closures, with cases like Weltbild, Esprit, and Hülsta marking the beginning of this trend.
By the end of August, the book retailer Weltbild will cease operations entirely. Stores will be closed, and online sales will be wound down. Clearance sales are already underway at the 14 remaining stores across Germany, and more than 400 employees are aware that they will soon receive their termination notices.
Weltbild filed for bankruptcy on June 10th, and the interim insolvency administrator, Christian Plail, attempted to find an investor. However, his efforts were in vain. Plail recently stated that “all potential buyers, given the current highly strained market environment, as well as the necessary investment volume and high transformation costs, were not willing to take over the business, even in a limited capacity.” He added that “a long-term and sustainable continuation of operations is not possible without fresh capital due to the ongoing loss situation.”
Thus, there was no hope for Weltbild. It’s possible that the outcome might have been different a few months ago. In recent years, insolvency administrators have often managed to save struggling companies, with new investors stepping in to keep debt-free businesses running.
Relatively new forms of bankruptcy, such as protective shield proceedings and self-administration, have also helped reduce the fear surrounding the “I-word.” And it’s true that the restructuring tools in German insolvency law often offer good chances for a fresh start.
However, not every company can be saved, and many of the so-called restructurings in recent years were merely company sales facilitated by low financing costs. But now, the situation is changing. “The market has turned,” says Andreas Ziegenhagen, Managing Partner for Germany and European Head of the Restructuring Practice Group at Dentons. “It’s become harder to find investors willing to take over companies from insolvency.” As a result, Ziegenhagen expects more company liquidations and closures in the near future.
Insolvency administrator Christoph Morgen from the law firm Brinkmann & Partner also predicts more closures. Morgen has saved many companies, but at the end of May, he had to announce the end of the long-established furniture manufacturer Hülsta. “A continuation of operations is not possible due to the lack of economic prospects,” he stated.
The predecessor company, Hülsta-Werke Hüls GmbH & Co. KG, had already filed for bankruptcy in October 2022. The process was completed at the end of 2023, and a new investor took over the business. However, as the second crisis began, the first was not yet overcome. “Repeated bankruptcies certainly don’t make it easier to convince investors of the viability of a business model,” notes Hans Konrad Schenk, a restructuring expert and partner at Grub Brugger.
This also seems to apply to the fashion company Esprit, which had already applied for protective shield bankruptcy proceedings for several German entities in 2020. While temporary stabilization was achieved, the second bankruptcy in May 2024 was less fortunate. Recently, the company announced that it would close all 56 stores in Germany by the end of the year, resulting in the loss of around 1,300 jobs. Only the brand rights for the insolvent European business will be sold to a financial investor.
The Aachen-based electric car manufacturer Next.e.Go Mobile faced a similar fate, as no buyer could be found despite intensive efforts. Likewise, the bankrupt bakery chain Lila Bäcker had to close all its stores on February 1st. Both companies had previously experienced bankruptcy and failed in their attempts to restart.
“In the era of low interest rates, a lot of capital was invested in crisis-ridden companies,” explains insolvency administrator Morgen. “This often allowed a new owner to be found for insolvent companies, giving them a chance to continue operating.” However, the situation has fundamentally changed with the rise in interest rates. Investors are now scrutinizing which business models are viable and which are not, making it more difficult to sell insolvent companies.
In addition to financing costs, the economic conditions in Germany are currently not ideal for taking on significant business risks, says Dentons specialist Ziegenhagen. Structural problems in Germany also play a role in corporate takeovers, making it more challenging to find investors for distressed companies.
However, restructuring consultant Schenk sees this development as a “normalization.” In recent years, there was sometimes the false impression that every company could be saved and restructured. That is now changing. Christoph Morgen also points out the “regulatory function” of insolvency proceedings. It is not about “saving at any cost.” Instead, companies without prospects must be allowed to disappear from the market. This is “harsh in individual cases, but important for the economy as a whole.”
ⓘ When a company goes bankrupt, it doesn’t necessarily mean that it is completely out of business or beyond saving. Bankruptcy, particularly in legal terms, is a process that provides an opportunity for a company to reorganize its debts and operations under the supervision of a court. The goal of certain types of bankruptcy (like Chapter 11 in the U.S. or insolvency proceedings in Germany) is to allow the company to restructure itself, reduce its debts, and become financially viable again.
In this process, the company might renegotiate contracts, reduce costs, sell off non-core assets, or even find new investors who are willing to inject capital to keep the company afloat. If these measures are successful, the company can emerge from bankruptcy in a healthier state, often with a more sustainable business model, and continue operating. However, this doesn’t happen in all cases, which is why not every bankrupt company can be saved.
