bauMax was taken private and delisted from the stock exchange back in 2004. In 2008 the controlling family bought out the minority shareholder, Spar Österreich. The timing could hardly have been worse and with the downturn that followed the global financial crisis bauMax found itself with too much debt and insufficient earnings to finance it. The process of international expansion was reversed. In 2014 the company pulled out of Romania (entered in 2006), Bulgaria (2008) and Turkey (2010). Hungary (1992) and Croatia (2000) followed in early 2015.

Restructuring and store closures reduced the size of the chain – at the end of 2014 it had 158 outlets, by September 2015 that total was down to 105.

It was a sad but familiar tale of a business that took on too much debt. When the downturn came it struggled to pay the interest from profits which were falling because of lower demand. Investment in the chain was squeezed and that led to further underperformance and an all too familiar downward spiral.

A break-up of the business has been rumoured for some time and, in the event, the front runner, Obi, is going to take on 49 of the stores in Austria and 16 will start to trade under a different name. All store closures have already taken place. Obi already had 33 stores there so there must have been many overlaps.

Outside Austria, Obi already trades in the Czech Republic and Slovenia and the bauMax website indicates that Obi has also taken the Slovakian stores. The stores should be a useful strengthening of Obis’s Eastern European presence. bauMax’s online site has already stopped trading

It looks as if OBI has been able to cherry pick the estate and the only remaining question is whether one of the other German majors (eg Bauhaus, which is already in Austria, or Globus) might want to take over the rest. Hornbach, currently third in the market, tends to be very specific about the stores it takes and the bauMax outlets are likely to be too small for it.

The DIY sector is still quite fragmented in Austria. We estimate that bauMax was still the market leader in 2014 and Obi was fourth.

Figure 1: Austria: DIY market structure, 2014-2015

Source: Dahne Verlag/companies/Mintel

This is a market where there should be further scope for rationalisation. We do not think that Austria has the same problems as the UK and the socio-economic changes that are working so strongly against DIY, but it still suffers from an ageing population and that is a problem on its own. The market is now dominated by the German market leaders, apart from 3e, which is a collection of voluntary groups.

The DIY decline in Austria may be a little slower than in other countries, and over the last five years we estimate that sales growth has been roughly in line with that of non-food retailers. But this is a mature sector and the chances of much real growth from here on are quite slim. The Austrian DIY sector is too fragmented and there is substantial scope for further rationalisation. This first round has been forced by the particular problems of bauMax, but it is surely not the last.