Adolf Merckle ranked, according to Forbes magazine, among the world’s 100 richest people. Yet the 74-year-old, who has become the most notable personal casualty of the credit crunch, had barely been heard of outside his native Germany until just two months ago – when a failed bet on Volkswagen shares led, ultimately, to his suicide last Monday night.

The story of his downfall is a tale of our times. It involves an entrepreneur who by last year was worth an estimated $9.2bn (£6.1bn, €6.8bn) after building an empire of 120 companies over four decades. The businesses together produced €38bn in annual revenues but were supported by interlocked, credit-fuelled transactions. Merckle was nothing if not a risk-taker.

But by taking one risk too many and stepping out of the cosy world of German capitalism and into high-octane derivatives through bets on VW and Frankfurt’s Dax-30 share index, he saw his life’s work unravelling. So on a bitterly cold evening – shortly after putting his signature to a bridge loan that is likely to lead to the break-up of his empire – Merckle took a short walk from his home to wait for the next train and death.

The shock felt in Blaubeuren, the small town in southern Germany where he lived, was huge. “The whole town was distressed. It seems incomprehensible and tragic that a respected, lively, powerful citizen saw death as a last resort,” says Jörg Seibold, mayor of Blaubeuren.

Merckle seemed the stereotypical German entrepreneur. He was secretive and built up some of Europe’s largest companies without courting publicity. He lived by what Otto Sälzle, the head of the regional chamber of commerce and a Rotary Club member alongside Merckle, calls the “Protestant ethic and way of life”. He rode a bicycle to work and enjoyed few of the trappings of wealth.

But his career showed a ruthless side not often seen in German business. Many commercial partners, chief executives, minority shareholders and union officials were brushed aside by Merckle as he built his empire.

Heinrich Zinken, long-time head of Ratiopharm, the generic drugs producer that was a main part of the billionaire’s corporate network, complained after his ousting that Merckle was “greedy, envious and held grudges”.

Later, even one of Merckle’s three sons, Philipp, had to step down as chief executive of Ratiopharm. He tried to impose new ethical standards after a medical kickbacks scandal but neglected the operating business. “It was a tough decision to take that affected him physically,” says Mr Sälzle of Merckle senior. “But he did it in the interests of the company.”

Merckle used his background as a lawyer to create an opaque structure for his empire, exploiting tax rules and shifting the domiciles of his businesses.

His main companies were based on his family heritage. He took the remnants of his grandfather’s tiny pharmaceuticals business and in 30 years turned it into Europe’s second-largest drugs wholesaler, Phoenix. A trip to the US in the 1970s showed him the potential for generic drugs and Ratiopharm, the manufacturing company he then founded, is now the sector leader in Germany.

Finally, Merckle used his mother’s and his wife’s positions in cement dynasties to turn a 1 per cent holding in HeidelbergCement into 80 per cent just three years ago.

The seeds for his downfall, however, were also sown during his rise. First there was the complicated structure of his companies, where his holding in one would be pledged as collateral for the buying of another. “He was very willing to use leverage and debt – and at both the holding and operating companies,” says a family adviser. “That was fine so long as liquidity was there.”

He used his stake in HeidelbergCement as collateral to back the loan that financed its £8bn (€9bn) takeover of Hanson of the UK two years ago.

He also enjoyed playing the markets, once saying: “I am sometimes also a day trader.” His passion started early when as a schoolboy he invested in a bond from the local energy company.

His hobby grew from there until, aside from what he put back into his companies, he invested funds in shares including – fatefully – those of Porsche, which impressed him with its unwillingness to file quarterly reports. By 2003 his trading was producing profits of €274m a year.

When the credit crunch hit, Merckle started to have liquidity problems. “He may have been rich in assets but he was poor in cash flow,” the family adviser says. As share prices plummeted, so did the value of the collateral he had placed with banks – and they started to ask for more. But with much of his empire tied up, Merckle felt constrained. In his only interview in recent months, he told the Frankfurter Allgemeine Zeitung that he had survived many stock market crashes but “never reckoned with a bank crisis of this size”.

So Merckle took what may have been a final throw of the dice. He took out equity derivatives that bet on falls in VW shares and the Dax index. VEM, the family investment company co-run by his son Ludwig, was in effect betting against the company he had admired: Porsche. The carmaker owned about one-third of VW but had hinted that it held more in stock options it did not have to disclose.

Still, when it revealed in November that it controlled closer to three-quarters of VW, market panic resulted and VW’s shares quintupled in value. Those, like Merckle, who had bet on falling prices suffered big losses. VEM estimated them in the low triple-digit million euros for his VW exposure but bankers say it was more like a high triple-digit sum.

Merckle – described by a banker as “always a tough negotiator” – then got a dose of his own medicine in talks with more than 30 creditors. “Having a 30-year-old banker tell you what to do when you’re used to telling 100,000 people what to do came as a complete shock,” says one family adviser.

The pressure was mounting. Portraits in the media, Merckle complained to the FAZ, portrayed him as “a gambler”. That in turn played badly in Swabia, the conservative part of Germany where he lived. An executive at Porsche, also a Swabian company, says: “We just didn’t understand what he was doing – the risk he was taking was enormous.”

One of the family advisers points to the responsibility that entrepreneurs such as Merckle often feel for their workers. “He was an integral part of local society and he must have felt like he failed these people.”

A woman in a Blaubeuren bakery says: “People looked up to him here. But when the problems started, a lot began to think, ‘Doesn’t he have enough money?’ Before, he was the big man in front of the bankers. And then he had to go to them like a little boy.”

By the start of this week, a solution was near for the problems of Merckle’s companies. A bridging loan from banks was close to agreement but Ratiopharm and probably Phoenix would have to be sold and Ludwig could no longer stay in charge of VEM. That caused anger among some in Blaubeuren.

Josef Walter, owner of a sports and shoe shop, is disgusted at the bankers who failed to support Merckle. He says: “I will wager that in five years whoever buys [Ratiopharm] will have laid people off and the state will be paying out unemployment benefit when it could have helped to keep people employed.”

Merckle’s own family say that “his powerlessness to act”, coupled with the dire situation of his companies, “broke” the entrepreneur.

Mr Sälzle says: “It means he had lost all influence. It must have been for him a disastrous experience and one that could explain the decision of his suicide. Monday was the day when he had to give everything up.”