Will Carriage Services be next?



It’s been less than a month since a partnership of Homesteaders Life and private equity firm Birch Hill Partners announced their intention to acquire 100% of public funeral home and cemetery operator Park Lawn Corporation.  As a matter of fact we are still about three weeks out from the July 29 stockholder vote to affirm that transaction.


That potential transaction, however, has people in the industry wondering who might be the next target for private equity.  And, it is not an invalid question when you think that in the last couple of years large funeral and cemetery companies on three continents have changed ownership in that fashion.  There was StoneMor Partners in the U.S.A, Dignity plc in Great Britain, and InvoCare in Australia/New Zealand where ownership moved from public company to private company with the help of private equity financing.


A couple of articles concerning Houston-based Carriage Services were published just last week by Seeking Alpha that seem to believe that the value of Carriage Services is more than the current stock price. . . . especially if private equity pays an equivilent of what is being reported in the Park Lawn transaction.  Here’s what a Seeking Alpha article entitled “Carriage Services:  Funeral home consolidator goes unnoticed in rapidly changing Market” states:


“. . . Park Lawn Corporation, the third-largest publicly traded funeral consolidator in North America and Carriage’s primary competitor, announced they are being acquired by both Homesteaders, a privately held burial life insurance company, and Birch Hill Partners, a private equity firm. Park Lawn was purchased at 62.1% over its stock price in a first-mover attempt by the acquirers to vertically integrate Homesteaders’ insurance business by locking in Park Lawn’s funeral homes as its primary sales locations. Since Carriage Services is the last small-cap funeral consolidator available on the public market with 30% greater revenue and cash flow on assets compared to Park Lawn, it is a likely target for over 5 similar funeral insurance companies to acquire for a similar competitive advantage. If purchased at the same EBITDA/EV multiple as Park Lawn, Carriage’s sale price would be $55 per share.”


Tom Anderson
Funeral Director Daily

That is an interesting take on Homesteaders rationale for being involved.  While there may be some downside for Homesteaders insurance business to be involved in the funeral home business as potential competitors with funeral homes that presently offer their insurance line, one veteran industry expert told me that he believes that there will be a race for the preneed insurance companies to secure as representatives of their insurance lines those death care firms that do over $1 million in preneed premiums annually. . . and, more and more of those $1 million premium firms will be acquired by the major funeral home and cemetery operating companies such as Park Lawn Corporation and Carriage Services as time moves forward.


From my point of view that very well could be a valid take and, if so, it looks like Homesteaders maybe got a jump on the competition in that potential race.


Again, if that take is valid and preneed providers have the cash available to offer great prices in order to secure equity in funeral home and cemetery consolidators to guarantee an inroads to preneed insurance customers through ownership in funeral homes, you may very well see valuations soar even among the larger consolidators and/or operators such as privately held companies Northstar Memorial, Legacy Funeral Group, The Newcomer Funeral Group, and others.  Theoretically, we could see those companies get unsolicited offers for their businesses much like the public companies, such as StoneMor Partners, Dignity plc, InvoCare, and Park Lawn Corporation have received.


Here is another article that came out on Seeking Alpha last week regarding Carriage Services.  It is titled “Carriage Services targets continued M&A and ambitious organic Momentum”.


Related Article“Why Private Equity”.  Funeral Director Daily


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