Buying a Funeral Home or Cemetery
Purchasing a funeral or cemetery business can be a rewarding but complicated endeavor. The process can take up to 6 months, from initial strategy to negotiations, and eventually integration. This is why you need an experienced team to guide you through every step to ensure your purchase is successful. So, where do you begin?
Initial Contact
You begin this process by assessing your goals, risk tolerance, location preferences, and finances. From there, define acquisition criteria and create a strategy for finding a funeral home or cemetery that best fits your needs. This strategy should include analyzing financial data, market trends, your competition, and your growth potential. This process usually takes 5-10 business days.
Valuation and LOI
The next step is to evaluate the specific business you’re attempting to buy. This involves reviewing financial statements, historical performance, future earnings, and comparable funeral market transactions to determine a fair purchase price. Once you determine the value of the business you’re trying to purchase, you should draft an offer letter or Letter of Intent (LOI) for the seller. It is recommended that you include your attorney and CPA for this. This part of the process usually takes 10-20 business days, but review meetings or the need for additional data can cause delays.
Negotiation and Deal Structuring
After the seller accepts your LOI, the negotiations begin. Here, the buyer (you) and seller agree upon terms, including price, payment structure, warranties, representations, and other contractual details. The goal is to secure the best possible terms. This is ultimately obtained by properly analyzing data and feedback from the seller and hiring an experienced team to help you structure the deal.
Once negotiations have concluded and both parties are satisfied, you can sign and finalize the LOI and set up any on-site visits that may need to happen during the transition period. This part of the process usually takes 15-30 business days, but can be delayed for several reasons, including on-site visits, scheduling conflicts, legal issues with the LOI, or the need for more data from either your or the seller’s side.
Due Diligence
Due Diligence takes place over the 6-10 week period following the end of negotiations. It’s a comprehensive examination of your newly acquired business, including on-site inspections, creating a due diligence report that summarizes the current state of the property, and organizing and signing an Asset Purchase Agreement (APA). Due Diligence can also include reviewing Consulting Employee Agreements, but only if needed.
There are many reasons why Due Diligence may go on longer than expected, including scheduling inspections to uncover any potential issues and then fix those issues. Additionally, delays may occur if the lawyers involved in the sale are unfamiliar with the funeral business.
Closing & Funding
After Due Diligence, the last part of the process is Closing and Funding. This is where everything is finalized, a closing sale date is selected, a Settlement Statement is drafted, and payment instructions are confirmed. This process can be delayed by legal questions or in the event you require additional financing.
Various options include loans, equity investment, or getting creative with your existing resources. You could also put together a lender package to receive credit. However, there are a couple of hurdles and potential delays you run into here, such as waiting for state approvals and life and liability insurance issues.
Buying any business is a significant undertaking, but purchasing a property in the funeral and cemetery profession comes with unique challenges. The process can take up to 6 months, from initial contact with the seller to perform any final due diligence and eventually closing. Completing all the tasks you need to ensure a successful sale, such as performing a valuation, drafting an LOI, and structuring a deal, is something you shouldn’t do alone. Luckily, there are qualified experts you can turn to for help.