Jake Johnson on the Merger and Acquisition Market

Jake Johnson
Johnson Consulting Group

With so much talk about the mergers and acquisitions in the death care industry of late, I thought it would be insightful to get the thoughts of Jake Johnson, President and CEO of Johnson Consulting Group on the subject. Mr. Johnson guides the company whom many consider to be the premier total solutions provider in the death care industry.  For more information on Johnson Consulting, including a webinar on the acquisition market, you can access their web-site here.

Here are a few of Jake’s thoughts on the M & A activity.

Jake Johnson:  We are currently handling more clients that want to sell their funeral homes and cemeteries than in the history of our company. Certainly a part of this is the ever increasing rise in cremation that is affecting the cash flow of most funeral directors and cemetery owners. Combined with that fact, a portion of the baby boomers are opting for less casket and service on a typical burial.

That being said, there is a new influx of buyers in the market today. Due to this increased number of buyers, the demand for properties is taking price up a bit and some folks are just cashing in. If someone is remotely thinking of divesting, the time just may be right.

Funeral Director Daily:  Jake, as we have moved into 2018 anecdotally it appears that there is a lot going on in the acquisition market. We have seen a private company like Legacy Funeral Group close over ten transactions this year and a public company, Park Lawn Corporation, be very active in the acquisition market also. How do you see the activity in acquisitions in the death care industry at the 2018 pace as compared to historical norms?

Jake Johnson:  Pretty much answered in the statement above but allow me to expand further. Not too many years ago there were there were the public companies and a few others buying properties. Today, that number has almost doubled. Parklawn was just a Canadian firm buying in Canada. Legacy was buying here and there, mostly smaller properties. Garnett Station wasn’t even in the market. Signature Group had just formed. The other rise is that the independent regional firms are seizing more and more opportunities in the markets they serve and willing to expand for the right opportunity. We always had SCI, Carriage, Stonemor and Northstar and they are still aggressive for the right opportunity. There also new entrants in the market ala The Journey Group and others that may be the right fit for the right seller. This is a large group of buyers and remember it is about supply and demand. When there is increased demand, prices normally go up.

Funeral Director Daily:   If I was an independent funeral home operator and was approaching retirement age with no family to follow in my footsteps, what would you suggest that I do to make sure that my funeral home was appealing to potential acquirers and how would I go about knowing that when I sold I did not leave dollars on the table?

Jake Johnson:   You could do lots of things. First of all, get your house in order. Make sure your facility is in tip top shape. If not, it could be a deduction from purchase price. This includes a roof that does not leak, air conditioning and heating in good order, carpeting should be in good shape, painting where necessary can enhance your facility at little cost, and your parking lot should be in good condition. Also remember that the first impression is everything. Many buyers will do a drive by to view the property before making an offer. That being the case make sure you have good curbside appeal. The lawn area should be green, cut and trimmed. All other landscaping should be in good order. Make sure any distressed bushes and trees are remediated. That’s the property issues. Now let’s get into the financial aspect a bit. Make sure your financial statements are in good order and tie to your tax returns. If you are anticipating going to market within a year, be sure that your pricing is addressed. If there is room to raise prices do so. Chances are your buyers will look at this piece of the puzzle. Right size your personnel to enhance your bottom line if there is the opportunity to do so. Lots of funeral homes have someone in the mix that probably should have retired or someone who is less than efficient, but you have kept them on for some reason. Now would be the time to make those moves as it will only enhance the price you will get.

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