Märklin paid €40m to consultants under its new investor — then filed for insolvency

Märklin had been a Göppingen family business since 1859, and three family lines still shared ownership in May 2006, when they sold the model-train maker to Kingsbridge Capital, a London financial investor, with Goldman Sachs co-investing. The stated aim was to trim the traditional brand to high profitability in short order and sell it on. The company had already been writing losses every year since 2004; under the new owners about 400 jobs were cut and the plants in Sonneberg and Nuremberg closed.

What the investor era is remembered for is the fees. In 2006, 10.7 million euros went to external consultants against a 13-million-euro loss; in 2007, 13.8 million against a 16-million loss. The insolvency administrator later put the three-year total at 40 million euros — almost the same sum as the accumulated losses. In 2008 alone, three advisory-board members received more than 400,000 euros in honoraria. According to the administrator, without the consulting costs Märklin would not have gone bankrupt at all.

At the end of January 2009 some 50 million euros of credit lines expired. The banks refused to extend them, declining even to wait for the KPMG restructuring report due on 13 February. On 4 February Märklin filed for insolvency at the Göppingen district court with about 1,050 staff and 128 million euros of 2008 revenue; around 700 creditors filed claims totalling 120 million euros.

Under the administrator the business returned to profit — 111 million euros of revenue and 12.4 million EBIT in 2009 — and in December 2010 1,350 creditors approved the insolvency plan. In March 2013 Michael Sieber, co-founder of the Simba-Dickie toy group, bought Märklin back into family ownership. One coda: an arbitration tribunal ordered the consultancy AlixPartners to pay the investor 13.4 million euros for faulty advice.