Business

The Acquisition Market: Should you buy or sell

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From my point of view at Funeral Director Daily it has appeared to me that the acquisition market has been very quiet during the 2020 pandemic year.  If that is true it makes sense in that individual funeral homes were pretty well consumed with how to satisfy their clientele during the socially distanced period and just didn’t have the time to look into the succession market.

The other day we received an unsolicited group e-mail  from our friends at Johnson Consulting Group entitled “Go or Grow”.  In that e-mail they passed on five reasons why they believe now is the time to act.  They also noted that one’s window of opportunity may not be very lengthy.

Here are the five reasons they gave as to why contemplation of “Growing or Going” may be good at this time.

  • Interest rates are at an all-time low. Right now, money is cheap and smart buyers know the value of a low rate over a long-term investment. They can afford more debt so prices are naturally higher.
  • Capital Gains rates are likely to increase under the new administration. So, if you are considering selling or planning for it in the next few years, you may want the ink to dry before rates increase and you receive less of your hard earned equity.
  • SBA lending programs are VERY attractive for buyers. With no lending fees and 6 months paid by the government, buyers know that these promotions won’t last forever, so NOW is their time to act.
  • A high case count year in the books with a continued upward trend looks lucrative. Selling when you’ve had an increase in call volume shows value for your business when you are at the table
  • Business values are high. The market is active and multiples are good right now.

Funeral Director Daily take:  I don’t have as much communication with individual firms as I used to when I was actively working everyday.  However, coming off of the pandemic year of 2020 in funeral service, I can see, and have actually heard from some firms with ownership ages in their 50’s and 60’s that they were really taken aback by the amount of effort that 2020 entailed when compared to what they were used to.  It wouldn’t surprise me to learn that there is a higher percentage than normal of this age operator who would consider being acquired at this time.

I can also expect that some of those same firms may have had increased revenue years as a result of more deaths due to COVID.  While somewhat hard to prove that increased revenue will keep up in the next few years, it may also be hard for a buyer to discern how much of that revenue was COVID related and how much was just plain business growth.  In my opinion, that equation might work to the seller’s favor.

Again, from my perspective, if you are a buyer or wish to be a buyer of additional funeral homes in your area, now might be the time to have that discussion with a potential acquisition target.  Those target funeral home owners may have moved more to the sell side after a year of pandemic funerals. . . it is just hard to know. . . .however, many potential acquisition targets will not want to make the first move because they may believe that could be perceived as a ready willingness to sell . . .possibly leading to a lower priced offer.

Those are just some of my random thoughts on the acquisition potential out there and why 2021 might be an interesting year for that area of the death care business as we move forward.  I would advise those who are thinking of either buying or selling to drop a note to our friends at Johnson Consulting Group for their expert opinions.

 

Johnson Consulting Group Webinar:  “Covid-19:  Adapting with Data.”  March 19- Tomorrow.  Johnson Consulting has commissioned a special report to show how COVID-19 has affected the funeral and cemetery profession.  Join Nelson Thulin and Lori Salberg to interpret the data and learn recommendations to help you not only survive but thrive in 2021.

National Funeral Directors Association Webinar“One Year Later:  Navigating the Funeral industry in 2021”.  Wednesday, March 24.  This webinar explores the understanding of the funeral profession’s experience one year into COVID-19.  Host Elaine Baldez will explain how funeral professionals have adapted over the past year and how to navigate the funeral industry in 2021.

National Funeral Directors Association will be hosting a webinar with FEMA officials that will explain how funeral reimbursement funds will be dispersed.  This is expected to be held on Thursday, March 25.  You can learn more from this informational flyer.

NFDA Podcast from the Brush with Death Series.  This podcast is entitled, “Funeral Advocacy:  NFDA on the Hill”.  In this podcast, Host Gabe Schauf speaks with NFDA Senior Vice President of Advocacy, Lesley Witter. Lesley is based in Washington D.C. working for the funeral profession within the halls of the federal government. She provides insight into her role as an advocate, and how legislation that is advantageous to funeral service professionals is advanced.

National Public Radio audio.  Natural Causes:  Why some are choosing an eco-friendly end of life.  An excellent discussion featuring Katrina Spade of Recompose, Philip Olson of Virginia Tech, death doula LaShanna Williams, and Oregon State Representative Pam Marsh.

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One Comment

  1. I read the original article by Johnson and this offers some great additional insight.

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