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Medium Profitability Merger & Acquisition

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)
Mock Interview
Interviewer

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?

You

Thanks. Before analyzing, I'd like to clarify a few key questions...

Interviewer

Good question. Let me provide some background information...

You

Based on this, I suggest analyzing from these dimensions...

AI Score
Structure Analysis Communication Business Sense Quantitative
Practicing...
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Practice this case with AI Mock Interview

A private equity firm evaluates acquiring Funeral Co to achieve 15% annual EBITDA growth over 5 years. The case requires candidates to quantify the $13M EBITDA gap between organic burial growth ($23M by year 5) and the PE target ($36M), then identify cremation services as the primary bridge, supported by consumer demand data and economics.

Key Insights:

  1. Customer preference trends (Exhibit 1 shows increasing cremation demand) validate business expansion strategy
  2. High fixed cost structure of funeral homes means variable revenue additions (cremations) drive significant EBITDA leverage
  3. The case illustrates how fragmented, local businesses can be consolidated for financial optimization through product diversification
  4. Constraints like zoning laws and customer preferences limit certain growth paths, requiring creative but realistic solutions