This article from the Australian Financial Review states that, even as the due diligence period is being extended for giant private equity firm TPG Global in their pursuit of Australia’s largest Death Care company, InvoCare, it is purported that TPG’s offer is more than 14 times the forward forecast EBITDA for InvoCare.

 

At least that’s how I read this statement in the Review article, “TPG has passed the valuation test – it is paying what looks like a pretty full 14½ times forecast FY24 EBITDA – and secured InvoCare board backing.”

 

If that is the case. . .that seems like a high price, but TPG Global will be buying the leader in Death Care in Australia and New Zealand.  And, TPG Global will also be buying the largest pet cremation company in Australia which InvoCare operates.  Sometimes, buying the leader and having the right plan does work out. . . even if the price looks expensive to us.

 

Related — The latest “up-to-date” news this week from the Australian Financial Review on the TGP Global/InvoCare transaction.  Click here.

 

An acquisition that worked —  The potential InvoCare purchase, because of its higher than expected EBITDA multiple,  somewhat reminds me of the General Mills/Blue Buffalo pet food transaction of a couple of years ago.  While I think the number has been kept internal by General Mills it was rumored that the food company paid 26 times EBITDA for Blue Buffalo.  Everyone I know thought that was out of sight and maybe not so good for General Mills.

 

However, General Mills had a plan for the pet food which brought greater value and more sales for the product.  General Mills used their grocery store leverage to place the product on shelf space in grocery stores. . . where consumers visit more often than pet stores.  It was a bold plan, but I think it has worked out for General Mills.

 

According to this article, pet food has now become General Mills fastest growing category.  Here’s what the article says about General Mills pet food growth since the Blue Buffalo acquisition, “Since our acquisition of Blue Buffalo nearly five years ago, we have driven strong growth on our pet food business.  We’ve increased our distribution in the US by four times. And we more than doubled our household penetration helping contributed to compound annual net sales growth of 15%.”

 

The InvoCare multiple –– The beyond 14x multiple that it appears TPG Global will be paying for InvoCare is much higher than I’ve been led to believe multiples are at this time in North America.  As a matter of fact, we found this March 2023 article on the Foundation Partners Group website where CEO Kent Robertson is questioning if the historical multiples can stay where they are during this inflationary time. . . . Here’s what Robertson said, “But if the historical multiple has been 8, it is not holding anymore.  it is more of a 7.5 or even a 6.” 

 

The Dignity plc multiple — As you may know a non-Death Care consortium that includes the United Kingdom’s Phoenix Asset Management Partners has purchased Dignity plc, the largest Death Care purveyor in Great Britain.  In the original offer, here’s what they said about the multiple they were willing to pay  —  “The Cash Offer implies an enterprise value that represents a multiple of no less than 21.3x Dignity’s estimated maximum underlying operating profit before depreciation and amortisation for the 52 weeks ended 30 December 2022 on a pre-IFRS 16 basis, as reported in Dignity’s trading update of 23 January 2023.”  

 

You can read more on the Dignity plc buy-out offer here.

 

Funeral Director Daily take:  I find it interesting that these multiples appear to be so high.  I also find it interesting that they come from groups not traditionally in the Death Care business.  Although, one of the leaders of the Dignity plc buy-out is Dignity plc’s former CEO Gary Channon.

 

To me there are at least two obvious reasons why a private equity company would pay these high of multiples.  One simple reason is that they are not using much debt leverage and are paying with investors cash.  The second reason, however, is more intriguing to me. .  . . “Do these companies see something very positive in funeral service, cremations, and pet cremations that those of us who have been in the business for a long time don’t see so clearly?”

 

More news from the world of Death Care:

 

• Moloney Family Funeral Homes announce the creation of a new outdoor committal garden.  Yahoo Finance
• Moloney Family Funeral Homes website
• Medical students honor body donors through words, deeds, and ceremonies.  The Conversation
• Community members raise concerns as part of Bethany Cemetery may be developed.  Video news story.  You Tube and KVUE – TV Austin (TX)
• People:  Kendra Marquez named executive Assistant at Walton’s Funerals and Cremations.  Northern Nevada Business Weekly (NV)
• Walton’s Funerals and Cremations website.

 

Enter your e-mail below to join the 3,295 others who receive Funeral Director Daily articles daily: