Could we have an LBO or Hostile Takeover in the Death Care Industry

One of the things that I find interesting about the death care industry is the continuing consolidation and spin-offs that seem to always occur.  Get a few funeral directors together and they are always talking about who is acquiring who.

I’ve been around long enough to see upstart Prime Succession grow fast and then be courted by both the Loewen Group and Service Corporation International.  Loewen ended up with the company but could not fund the debt and Alderwoods was born.  They were then eventually broke up and the beginnings of Keystone Group (the forerunner of Foundations Partners) was born and Service Corporation eventually ended up with some of the Loewen/Alderwoods properties too.  It just keeps going around and around.

So, with the stock market down, I did a little studying and wondered where the next “big thing” in the acquisition game could come from.  Here are some things that I found out.  This is not totally scientific, but I’ve been around the funeral home business for over 30 years so I do draw some conclusions, even from limited data found on the public companies.  First a little comparison on the three largest public companies using end of year 2017 financial data and current stock prices.  Also, facilities includes both funeral and cemetery properties and my hunch is that the higher percentage of funeral facilities a company owns, the higher revenue per facility it will generate.  i.e. my hunch predicts that an average funeral home brings in more revenue than an average cemetery.

Service Corporation International – $3.095 billion in revenue.  $569 million in Operating Income (18.38% of Revenue).  They have 1,972 properties of which 76% are funeral homes.  The average property takes in $1.569 million in revenue per year.  SCI stock is at $39.73/share giving the company a market value of $7.2 billion

StoneMor Partners – $338 million in revenue.  Negative operating income.  They have 413 properties of which 22% are funeral homes.  They are a predominantly cemetery company.  The average property takes in $818,000 in revenue per year.  StoneMor stock is at $2.29/share giving the company a market value of $83 million.

Carriage Services – $258 million in annual revenue.  $48 million in Operating Income (18.6% of Revenue).  they have 213 properties of which 85% are funeral homes.  The average property takes in $1.2 million in revenue per year.  Carriage Services stock is at $15.61 per share giving the company a market value of $294 million.

So, to take those statistics in perspective, by revenue SCI is over 9 times larger than StoneMor Partners and almost 12 times as large as Carriage Services.  By market value SCI is about 87 times the size of StoneMor Partners and  about 25 times the size of Carriage Services.  That certainly tells you that either StoneMor or Carriage Services could certainly be ripe for a leveraged buy out or hostile takeover if SCI was at all interested.

At Funeral Director Daily, on one hand, we don’t think that SCI would be real interested in that type of situation simply because with its size the company would probably be required to  relinquish some or many of the properties due to Federal Trade Commission monopoly rules.  On the other hand, the stock prices of Carriage Services and StoneMor are down and SCI over the course of its history has made some big splashes to keep its growth moving forward.

We will continue on this tack in our next column and ponder the question of whether StoneMor and Carriage Services could be takeover targets and if so, who in our industry might benefit from such a move.

Funeral Director Daily note —  You probably noticed that we did not publish Christmas week.  We have published five days a week for about two years and over the next couple of winter months we will publish on not as regular a basis.  I still enjoy doing this, however, this winter season we will be doing some traveling and I just won’t have the time to do the articles every day.  The best way to ensure that you don’t miss anything is to make sure you are a subscriber so every article ends up in your e-mail box.  Come Spring we will continue to publish five days per week.

 

 

 

 

 

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1 Comment

  1. Michael Mallory on December 31, 2018 at 6:04 am

    Interesting thought but due to it’s size and the acquisition targets I would bet Justice gets into the act to prevent a monopoly situation …..Thanks for this service …..I don’t generally swim in the waters that you write about IE funeral service aggregators but your other articles on customer service can be applied even in my capacity as a trade funeral director/embalmer. Please keep writing ….some days your articles are the only brain dendrite stimulus I experience



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