Having seen news last week that Foundation Partners closed on an acquisition in Wisconsin I did a little research on what, at least anecdotally, are the acquisition targets of the larger companies.  I did so because the purchase of the Schneider-Michaelis Funeral Home in Jefferson, Wisconsin, didn’t seem to fit what Foundation Partners had been doing recently.

I found this an interesting topic and I also found an interview published in the May 2017 edition of the The Southern Funeral Director with a leading death care advising company CEO, Jake Johnson of Johnson Consulting, that seemed to back up my opinions.  You can read that Q and A from the Southern Funeral Director here.

As expected, profits fuel acquisition targets, but you can also understand that the growth of cremation, the loss of revenue per service, and the growth or decline of a community are reflected in the EBITDA of a firm both at present and going forward.  My opinion is that it is the forward looking possible EBITDA that drives acquisitions — nobody wants to pay for an EBITDA that is in the rear-view mirror.

So, I found two types of firms that are ripe for acquisition and can drive the best prices.  First and foremost is the large metropolitan funeral establishments that can spread fixed costs over hundreds or thousands of cases.  These firms are in large markets where the acquiring firms can look to pick up additional cases and market share through a growing population and shifting business loyalties.  Generally, only the big guys — SCI, Carriage Services, StoneMor, Foundation Partners, NorthStar Memorial Group, and possibly emerging regional players like Legacy and Signature Group – have the capital to be players in these markets.

The second type of acquisition target is one similar to the Schneider-Michaelis Funeral Home that was just purchased by Foundation Partners.  This funeral home is a small volume operator but it is in the vicinity of Nitardy Funeral Homes — a three roof branch owned by Foundation Partners.  In other words, it is a strategic value that can not only help Nitardy (Foundation Partners) build a little more volume – but by scaling the enterprise expenses it can bring down the expenses per case.  These are the types of acquisitions that any funeral home can make with the right planning — buying out your neighbor, increasing your volume, and lowering your fixed costs per case.  That is the same formula that Bob Waltrip used in 1962 when purchasing his second funeral home on Hyde Boulevard in Houston or that Pierce Brothers did in forming neighborhood mortuaries in Los Angeles in the 1970s.

So, if you dream about your one roof funeral home growing, you don’t have to be left out of the acquisition game to help fuel that growth.  Know the situation around your area and then talk to someone in the advising business – to lessen your chances of a mistake – on how to go about the purchase.  It is the American way and has proved successful over and over in the funeral business.

[wpforms id=”436″ title=”true” description=”true”]