Deadly combination
Last week, the #1 funeral service company in the United States announced it would purchase the #2 company in that field. Service Corp. International will buy rival Alderwoods Group in a deal that involves around $1.3 billion.
Service Corp. International will end up with 15% market share in the US, with an annual revenue of around $2.5 billion. It will own over 1,700 funeral homes and around 500 cemeteries throughout the US and Canada.
The president of Service Corp. is quoted as saying; "We believe this is an industry that needs scale, driving efficiencies." The industry is hardly a tight oligopoly, but it is now far more consolidated than it was 15 years ago. In fact, the 1990s saw a first round of buyout, which ended up with key companies like Service Corp. and Alderwoods financially overextended. In the past few years, both companies had paid down debt (Alderwoods reorganized from bankruptcy.)
These chains, while limited in scope nationally, dominate certain local markets and had a tight grip on mortuary costs. They often own locally named mortuaries that service different groups (Catholic, Jewish, Protestant). In reduced competition towns, they have been accused of rigging prices. While the industry is slow growth, it is one, unfortunately, with a steady stream of customers. It seems that a new round of consolidation has started.
