You probably heard the news that Park Lawn has submitted an offer to acquire Carriage Services. If the deal goes through, Park Lawn, with its current 175 funeral homes, will double in size by adding the Carriage Services locations.
But that is just the latest acquisition news. Every week a handful of small acquisitions are announced, and now and then, a block-buster acquisition like the Park Lawn + Carriage Services deal hits the newsfeed.
SCI, Park Lawn, and Foundation Partners seem to be the front runners in the funeral home acquisition market. In addition, a handful of private-equity-backed consolidators like to buy up distressed funeral homes and cemeteries, clean them up a bit, bundle them together, and flip them to one of the big guys at a healthy profit.
In an industry filled with family-owned funeral businesses, news of an acquisition used to be a major story. Now it’s pretty common.
I have a lot of first-hand experience with acquisitions, mainly because I spent the early part of my career working in the technology industry, which has always had a lot of merger and acquisition activity.
Here’s a fun fact…in the first 12 years of my career, I was on one end or the other of 14 mergers or acquisitions! At least once a year, the company I worked for bought another company or we were acquired. It was nonstop chaos!
I started my first company to gain some stability, or at least that’s what I hoped. But even my small technology marketing company had to fend off three acquisition attempts in our first seven years.
I eventually sold that company to a competitor and started my current marketing consulting practice.
My first funeral home client had recently acquired two funeral homes in addition to the two he already had. Our first job was to develop a cohesive marketing plan for growing all four locations.
I worked with my second funeral home client for about a year to overhaul his web presence (website, Google, Facebook, etc.). Shortly after wrapping up our project, Foundation Partners approached him with an offer he couldn’t refuse.
Now that I think back on it, more than half of my funeral home clients have either recently bought other locations or were acquired within a few years of our projects. A good marketing project puts you on the radar of acquisition companies because they like to buy successful businesses.
My point is that I have lots of first-hand experience with mergers and acquisitions. I’ve also helped many clients prepare for an acquisition or take their business to the next level after they made an acquisition. I’m not a broker who can help you put the deal together, but I can help you prepare for and navigate the experience.
Here are three points to consider if you want to be acquired or are in the process of being acquired.
#1 – Do not tell your staff until the deal is done
Your staff wants a stable job and paycheck. The easiest way to scare the heck out of them is to tell them you are entertaining offers. Do you know what happens when you tell your staff before the deal is done? The good people leave!
I’ve seen it happen over and over again. If the owners let the staff know they are considering an offer, the good people immediately start looking for new jobs, and the mediocre staff members become completely unproductive.
If the deal falls apart (which most do), you’ve lost your reliable/productive staff members, making your life much harder.
Wait to tell your staff until the deal is done and the money has been wired into your bank account. It’s not about hiding information. It’s about giving them a stable work environment as long as possible.
#2 – Your real estate may be worth more than your business
Years ago, I was in a mastermind group with a bunch of small business owners. One of the members owned twenty bowling alleys scattered around the Midwest.
Every year he would sell off a couple of properties and acquire a few more. But he never sold a business to another bowling alley operator; instead, he always sold to someone who wanted his real estate.
His reasoning was simple. There were a small number of bowling alley consolidators bidding on properties, and they would pay based on a multiple of EBITDA. But many corporations need a building the size of a bowling alley, with lots of parking and a good location. They value your real estate far more than your earnings.
He estimated that he could make at least three times more money selling to a CVS or a Wallgreens than selling his business to another bowling company.
Recently, one of my funeral home clients had a competitor who did exactly what my friend with the bowling alleys did. He sold his real estate to someone outside the funeral industry and got much more than a consolidator would have paid.
#3 – Invest in some marketing today to sell for more down the road
Good marketing is the equivalent of putting a fresh coat of paint on a house before selling it. It’s the same house, but better curb appeal always increases the purchase price.
Companies like SCI, Park Lawn, and Foundation Partners do not buy funeral homes in terrible shape. They want good successful businesses to add to their portfolio; they’re not looking for a “fixer-upper”. Other companies will buy a rehab project, but they will not pay top dollar.
If your building needs remodeling, do it. If your marketing needs an overhaul, do it. To maximize your sale price, it’s a good idea to spend time and money getting your business ready before putting it on the market.
Those are three points to consider if you are thinking about selling your funeral home. Next week I’ll discuss some points to consider if you want to acquire other funeral homes.
Until next time
John
PS: If you are thinking of selling in the next few years, call me. Let’s put a fresh coat of paint on your marketing and see if we can increase your curb appeal and purchase price.
