Going into business is often thought of as an ambitious move for someone who is prepared to take risks. After all, as well as the potential for great success, profits and your own brand, the danger always exists of failure, collapse and infamy. As the old saying goes, for everyone that makes it, there are no doubt many more who did not. Even when you get to the top, or at least have made a name for yourself, things can still go wrong, whether it's the external impact of a financial crisis or changing consumer demands, or internal problems with corruption or mismanagement.
A crisis does not always have to be a bad thing for a company. Some are even able to bounce back after declaring bankruptcy by restructuring their operations, slashing the workforce or reducing pay rates. But for others, bad decisions or outright criminality can produce collapses so total, that nothing can be saved from them. Throughout history, we have seen businesses that have fallen into this scenario, often well-known names which virtually cease to exist.
Many of the businesses falling into this category over recent years have been in the financial industry, which has suffered following the financial crisis of 2008. Particularly over the last two or three decades, there have been remarkable transformations in technology resulting in some businesses becoming redundant or obsolete, while other previously unheard of names have suddenly emerged. In the following list we take a look at 12 of the most dramatic business disasters from past and present.
12 South Sea Company
Back in the day, before instant communication, 24-7 media coverage and Google, it was much easier to deceive the stock market. That was what happened after Britain signed the Treaty of Utrecht with Spain to bring the Spanish War of Succession to an end in the early 18th century. The South Sea Company was ostensibly set up to conduct trade in South America with Spain. While information was fed to the London stock market that business was booming, the reality was that virtually no trade was taking place. After the creation of a massive speculative bubble, share prices collapsed when the truth became known. The leading conspirators were arrested and prosecuted for their actions.
11 Allied Crude Vegetable Oil Refining Company
The collapse of this company in November 1963, was part of one of the biggest scandals to that point in history to hit the New York stock exchange. Anthony de Angelis had founded the company in the 1950s to take advantage of opportunities to sell vegetable oil and other products to Europe at low cost. When the extent of the swindle was uncovered, during the same week as the assassination of President Kennedy, it became clear that De Angelis had convinced over 50 banks and investment firms to provide him with loans to expand his business ventures. He had systematically provided false numbers on the amount of oil he controlled, confusing inspectors by filling tanks full of water or by moving oil from one tank to another.
10 Pan Am
To anyone who traveled in the 1960s and 1970s, Pan Am was as good as it got. The company had taken full advantage of the wider availability of air travel and the expansion of tourism after World War II. But its demise demonstrates that sometimes events come along that a company has no control over. First, its reputation suffered a severe blow after the terrorist bombing of Pan Am flight 103 over Scotland in 1988, killing everyone on board. Only a few years later, the price of airline fuel shot up in the face of the first Gulf War in 1991. Pan Am, having been in existence for over 60 years, filed for bankruptcy a few months later and by the end of 1991, it was no more.
9 Long-Term Capital Management
The Asian crisis of 1997-98 was presented to begin with as a problem only for that region of the world, as growth rates fell and currency values dropped in places like Thailand and Indonesia. But shortly afterwards, it became an international issue when the Russian government defaulted and Long Term Capital collapsed in 1998. The hedge fund had profited from the huge increases in investment that occurred in the early part of the 1990s, but as conditions shifted and economic activity in Asia began to decline sharply, it was left exposed. Its demise was the high point of one of the largest crises on Wall Street in the years leading up to 2008.
The demise of Enron provided an example of one of the largest scale frauds in US corporate history. The energy firm had portrayed itself as a modernizing utility corporation able to compete in the market. However, it did so by systematically falsifying its accounts, and concealing its financial dealings and losses through the use of shell companies and non-existent partnerships. When it filed for bankruptcy in 2001, thousands of people lost their jobs and billions in investments were wiped out. The damage did not stop there, with Enron’s accounting firm Arthur Anderson being forced to shut down the following year as a consequence of its part in the affair.
The major telecommunications firm, which at one time was the second largest in the US, collapsed amid corrupt dealings and false accounting practices in 2002. For three years prior to that, the company’s accounts had been deliberately falsified in order to prevent the stock price from falling. The bankruptcy proceedings were heard by the same judge overseeing the Enron case. In early 2003, Worldcom was no more as the company changed its name to MCI Inc. Shortly afterwards, it was taken over by Verizon and its operations were gradually integrated into those of its new owner.
6 Northern Rock
A candidate for the title of the British Bear Sterns, the fall of Northern Rock was the signal for the economic crisis to hit the UK. The company had provided mortgages to householders and also ran savings accounts. As savers queued up outside branches to obtain their money, it suddenly became clear that the firm lacked the financial resources to cope. The government was compelled to step in and provide Northern Rock with a bailout, and it was later wound down.
5 Bear Stearns
The failure of the investment bank in March 2008, was one of the early indications that all was not well in the financial world. The bank was active above all in the securities market, an area that triggered the sub-prime mortgage crisis. In a desperate attempt to save the bank, the fifth largest investment bank at the time in the US, the Federal Reserve of New York provided it with an emergency loan arranged together with JP Morgan. When this failed to resolve the problem, the bank was sold to JP Morgan, at a value of $10 per share. The Bear Sterns name continued for a short period of time, but by January 2010, JP Morgan had phased it out.
4 Lehman Brothers
The events of September 2008 marked the real outbreak of the financial crisis. Lehman Brothers, a US bank with over 150 years of history, fell victim to the seizing up of capital markets and proved no longer capable of borrowing enough to meet short-term commitments. Right up until the last minute, many expected that the US government would step in to save the bank, but ultimately, over the course of a dramatic weekend, it was decided to let the bank fail. Its remaining assets were taken over by its competitors, which all benefited from a subsequent multi-billion dollar bailout. But by that stage, Lehman Brothers had become a name for the history books.
3 Washington Mutual
Anyone who thought Lehman Brothers was the worst of all the crisis was in for quite a shock. Less than two weeks later, Washington Mutual became the largest bank failure in US history. On September 25th, 2008, WaMu bank was seized to prevent its quickly mounting losses. Over the proceeding weeks, a total of $16 billion in deposits had been withdrawn from the bank. A rapid deal was concluded with JP Morgan to purchase Washington Mutual, and it wasn't long before all its branches were re-branded as Chase institutions.
The disappearance of the DVD and game rental firm arguably offers the most modern example of the disastrous consequences that result from failing to keep up with technological trends and emerging developments. In a matter of ten years, Blockbuster went from virtually controlling the rental market in 2000, to filing for bankruptcy in 2010, leading to the closure of its stores and loss of thousands of jobs. The big change that had occurred was the huge advances in the internet that enabled individuals at home to stream films and other content online. Netflix, whose founders allegedly approached Blockbuster in 2000 to propose a joint venture, has now assumed Blockbuster’s position as the dominant player in the modern-day home entertainment sector.
The incredible technological developments that accompanied the emergence of mobile phones in the 1990s were led by Nokia in many areas. But it failed to keep up with the competition, particularly as other companies proved able to produce more advanced products at a fraction of the production cost. Having been the leading phone maker for some time, it began losing market share and money. Eventually, it was bought by Microsoft which later announced that it would discontinue use of the Nokia brand. This marked the end of the Finnish company which had operated for over a century.