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Medium Profitability M&A

Funeral Homes

#Death Care #Funeral Homes
ProHub Comment

This case tests financial modeling and business logic in a non-obvious industry. Candidates must calculate the EBITDA gap, identify cremation as a viable revenue lever (supported by consumer trend data), and recognize both opportunities and constraints in execution. The case progressively builds complexity from financial calculations to strategic recommendations.

Estimated Time 15 minutes
Difficulty Medium
Source Columbia
50 / 100
Our client is a private equity firm looking to acquire Funeral Co, a company operating 100 funeral homes in the US. The client targets to grow Funeral Co’s EBITDA by 15% annually over five years. Should the client acquire Funeral Co?

Clarifying Information

  1. There are 2 types of funeral ceremonies performed by a funeral home: (1) burial and (2) cremation. Industry trend is shifting towards more cremation.
  2. Funeral homes have a high fixed cost structure.
  3. Funeral homes industry is highly fragmented with over 20,000 funeral homes scattered across US. 75-80% of the homes are owned and operated by individuals or families though ~20-25% of the homes are operated by private corporations
  4. Only funeral home in the areas they operate in
  5. The target is currently offering only burial services; serving only Christians in small towns
  6. Our client (PE firm) wants us to concentrate on increasing EBITDA only, i.e. to double EBITDA in 5 years (15% IRR over 5 years = 2x)