Dan Isard
on
In this industry spotlight, we want to highlight key insights on buying and selling.
By my estimate, now in 2021, funeral service and the cemetery business combined make up a $24 billion dollar Market Cap business segment. This is almost double what it was in 2000.
Within the owners we have two groups. The Public Money group:
- SCI is $9 billion,
- Park Lawn is $1 billion,
- Carriage $700 million,
- StoneMor $260 million
The Private Money group makes up the 75% of all locations. Private Owners (either Mom & Pop or Private Equity money) make up the remaining $13 billion! This is about a 40%/60% split Public to Private. In 1999, just before the fall of SCI, Loewen, and Stewart the split was about 25%/75% Public to Private.
Yet, the Public, worth a combined $11 billion, have built very few funeral homes or cemeteries from scratch (organic growth). They acquired and then operated. So, look at it this way, almost all the Public Money started within the Private Money group.
The Private group itself grows from three actions:
- True organic growth, gaining market share from new population and coopting the Public Company’s patronage.
- Acquisition from other members within the Private Group.
- Acquisition (however infrequent it might be) from the Public Group.
The Public Group does divest at times. Sometimes when they buy something better, as we saw in 2010 and 2014. Sometimes when they are cleaning up their books, as we saw in 2004 to 2006 (and in 2019 with StoneMor and their left coast divestitures). Sometimes when they bought something, but the market doesn’t appeal to them any longer (as we see a little bit each and every year).
So how does this marketplace keep moving as it does? Age. The average age of a funeral homeowner in 1995 was 55 years old. I suspect this has not changed. That means, if half of the owners are going to retire before age 65 and half after age 65, on average we are going to have a turn-over of about $13,000,000,000 in business equity over the next 20 years.
That is about $650,000,000 in transactions a year for the next 20 years! I suspect that the public money is going to take about 15% to 20% of this. This leaves the other 80% to 85% to go to the private world.
Within the private world we have, as I said earlier, two groups. Mom & Pop’s and Private Equity will vie for the half a billion-dollar bundle and grow that pot. I suspect that Mom & Pop will acquire about $400,000,000 of that and the Private Equity will acquire about $100,000,000.
I suspect the Private Money will move to the Public Money about every 5 to 7 years. Private Equity people are not patient. They want to get into a market and get out before the tide turns.
Right now, we are in one of the biggest rising tides I have seen since 1997 or 1998. Many buyers coming in. The low cost of money, relatively low tax rates, stable operations all cause a perfect storm. This is the time to buy. It is the time to sell, as more buyers equals higher value. Or, wait. The tide will come back in in 5 to 7 years just as strong.