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Buying and Selling Funeral Homes

      
Date Published: 
May, 2006
Original Author: 
Tom Johnson
Johnson Consulting, Phoenix, Arizona
Original Publication: 
ICFM Magazine, May 2006

Back in the '80s, '90s, the public companies were very prominent in buying funeral homes. They did probably 80 to 85 percent of the transactions in the United States—in the world.

Who are the buyers for funeral homes today?

• Public companies. They've got their operations pretty much under control and they're starting to look again. Some are even buying again, so that's significant.

• Venture companies. When stock companies went down, venture companies pretty much dried up, and I doubt if they'll be back in. There are a few hangers-on, but they're probably not going to be significant in the future.

• Privately held national firms. There are private individuals that will buy in the East Coast, the West Coast, the South and the North. It's become fairly significant in what's going on.

• Regional operators. Probably the most prevalent acquirers in recent years have been regional operators that have been around for years. They are solid companies with their debt pretty much paid off at this point and they've got an arsenal of money to buy firms. They've been doing a lot of transactions the past few years.

• Key employee transactions are still taking place, although financing is a little difficult in some cases.

• Family transfers that have been going on for years and years—that's a big piece of it.

• The competitor. Often who's got more to gain than anybody else in the sale of a funeral home? The competitor. Why? Efficiencies with rolling stock and personnel—you might be able to close down a facility or whatever.

Your competitor has more to gain by buying your firm, and you have more to gain by buying your competitor's.

One piece of advice: If you're at odds with your competitor, mend the fences, bury the hatchet. Have a lunch, a breakfast, a dinner—something. Become at least on speaking terms with this person. Because the day he decides to sell, that's when you want to jump in. It could be one of the best financial things that could ever happen to your company.

On the other side of the coin, if you decide to sell and he buys, it could be the best thing for you.

So don't rule out your competitor when thinking of a transaction. Often we do, and we shouldn't.

 

This article compiled from an address presented by the author at the 2006 ICFA Annual Convention

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