Business, Finance

Is this the start of the M & A train we were told is coming down the tracks?

Foundation Partners why I partnered

A high number of Baby Boomers in ownership roles, the un-planned last two years of Covid-related operations, the thought of an increase in capital gains taxes. . . . . .those are all valid reasons that have many owners of funeral homes thinking of getting out of the ownership realm..  At the beginning of 2021 it was predicted that those issues, among others, could quite possibly lead to a large volume of funeral homes changing hands in the 2021 calendar year.

I have no statistics to further any of my beliefs, but I do believe that this movement may be underfoot.  I’ve not seen it, however, in the announcements, at least as of yet, by the big public companies.  There’s been some of those acquisitions — but there is every year.  Maybe we will hear about an avalanche of these types of transactions after the beginning of the new year. . . but I just don’t know.

However, as I peruse death care related articles I do seem to see more of those announcements that announce changes in ownership.  Just this week, I’ve seen three  —  one is about a public company purchasing a century-old independent, one is about an employee becoming the owner of a funeral home, and the third is about a funeral home buying a willing competitor.

What’s interesting to me is that we all seem to fret about the end of the small individually operated funeral home.  This is a pretty small sample size, but 2 out of those 3 transactions allow for good old small business American enterprise to continue.  And, I’m guessing that while many in our profession get nervous about the National and Regional operators taking over. . . . there is a lot of small business, individual proprietor operations continuing to be sold to individuals that allow for the “American Dream” of business ownership to continue and flourish.

Tom Anderson
Funeral Director Daily

I’m told that about 20% of our nation’s funeral homes are under National or Regional group ownership.  That leaves about 80% for individual small business ownership.  It’s interesting — as many are resigned to the fact that America will become a nation of only National or Regional group operators.. . . .I don’t see it that way.

I see the death care business changing. . . . .but I also see that change giving greater ability to an individual to own and operate their own death care facility or business.  I see the American consumer looking at different options for their death care. . . . and, I see those differing options bringing about more “niche” businesses in the death care field.  These “niche” businesses will be perfect for an individual entrepreneur to potentially own and operate. . . . . think about a funeral planning business, or a alkaline hydrolysis only business, or a “Green” funeral only business.

I think the opportunities are there. . . . and I think as these “niches” grow, the percentage of death care businesses owned by National or Regional operators may, on a percentage basis, decline.  The National and Regional operators will have large numbers, but the opportunities for the “niche” operators, in my opinion, will be present for success also.  And, if the “niche” opportunities unfold as I see them. . . .less capital may be needed to get that individual operator business underway. . . they won’t all need $2 million buildings. . . they will be creative in their approach.

The “American Way” is that when something gets too big, the small guy will find a way to compete against that size. . . . .just ask Sears Roebuck and Company – America’s 3rd largest consumer retailer in 1993 with $2.4 billion in sales (behind Wal-Mart and Target)  —  if they thought a little outfit called Amazon, started in 1994, that sells books by mail would ever pass them by.

Here’s the three funeral home sales referred to in this article:

More news from the world of Death Care:

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