Is Foundation Partners changing the Acquisition Paradigm
Probably the worst kept secret in the funeral industry over the past 30 days or so has been the pending acquisition of Premier Care of Florida which includes several properties, most notably Anderson-McQueen Funeral and Cremation Centers of Florida, by Foundation Partners. Anderson-McQueen, which serves the west coast Florida counties of Hillsborough and Pinellas, has been known nationwide as an innovator in “celebration” style services.
Foundation Partners, founded by former Keystone Group executives, has been in business since 2010 and in the last few years has revved up their public outcry to bring a new level of services to families that they serve. If you remember, prior to the current Foundation Partners management, the company brought in Brad Rex as CEO. Rex came from the hospitality industry, new to the death care industry, and was tasked with giving the company more “experiential” products for their consumer families. Rex is no longer CEO of Foundation, but the enhanced service mantra to families still exists.
One can possibly argue how that has worked and played out over the last four years but if you go to the Foundation Partners web-site you will see that it appears that their vision is to be more than just simple funeral homes going forward. I have looked at their location map and one might wonder if they are changing the paradigm of thinking in the acquisition business.
What do I mean by that? For at least the last ten years, and maybe longer, we have known that cremation services will grow at virtually all funeral service locations and that will result in less revenue per case going forward in funeral homes being acquired. So, while it was easy to see historical revenues, profits, and EBITDA in the acquisition business — and demographic information could give pretty good indications of future call volume — the risk factor for the acquisition company was how fast cremation would grow. Acquisition companies tended to stay away from fast growing cremation areas, unless, like Service Corporation International (SCI) they could roll those companies into their low-cost cremation brand, such as Neptune Society.
Take a look at the Foundation Partners location map on their web-site. and take a look at where they are located while remembering that many of their northeastern and southeastern locations were part of the original 22 funeral homes they acquired from SCI in FTC mandated sell-offs. Also, take notice that in the last 30 days they have announced purchases of two very well known high volume, high cremation operators — in addition to Anderson-McQueen, they acquired the Cremation Society of Minnesota within the last month or so.
Those two new locations, when looking by state and out to the year 2030, have cremation projections of 79% (Florida) and almost 87% (Minnesota) according to the NFDA survey. Couple that fact with existing business operations (and projected 2030 cremation rates) in Washington ((86%), Idaho (80%), California (79%) and Oregon (83%) and you have to ask yourself, “Is Foundation Partners strategy to find large cremation pockets and then believe that they can, through consumer experiential means, greatly increase the revenues per service to enhance shareholder value in a way that has not been done across the country as of yet?”
If that is the strategy — there is a great upside to it. Greatly raising revenues per service will in turn greatly enhance profitability and shareholder value. Acquisitions of late have really focused on “not losing revenue per service” rather than taking low revenue per service firms and trying to raise the revenue per service by providing additional experiential services that consumers may be willing to pay for. Finding out what those additional services are may be the key for Foundation Partners future success.
I’m a fan of TV’s hit show, “Shark Tank”. I love to watch it because — in a much smaller way — I’m somewhat of a venture investor and mentor with young people starting businesses and I get some good advice from watching. On that show is Dallas Maverick owner and investor Mark Cuban. If you watch regularly you will see that Cuban invests in what he calls, “Consumer experiences” as he believes the next generation of Americans will pay for experiences over assets. I’ve seen him invest in Halloween haunted house experiences and Iron Man – Tough Guy races among other things because he believes in the “experiential value” of it for the consumer. More often than not, on Shark Tank updates, these investments turn out to be hits.
So, there is a take I have on what one company may be doing in the acquisition market. Whether I’m right or wrong on Foundation Partners intentions for these acquisitions really won’t matter. What will matter is that – as it has always been in funeral service — if you can provide what families need and want at a price that they are willing to pay — then you will be successful.[wpforms id=”436″ title=”true” description=”true”]
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