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Introduction
The Loewen Group, Inc. began its consolidated death care business in 1969 and is the second largest death care firm in North America. In the 1970s and 1980s, the company experienced explosive growth through the acquisition of many funeral homes. By 1999, the company is in major financial crisis because of enormous debt acquired as the result of financing through debt.
This death care industry has two primary activities: providing services such as funeral, burial and cremation arrangements and products such as selling caskets, urns, cemetery plots and gravesite markers. These services and products are normally sold on a pre-need or at-need basis. With a pre-need arrangement, customers pay in advance for the services and products. Under an at-need basis, payment is received at the time of death. The revenues in this industry are relatively predictable because:
? Death rates are driven by demographic factors
? Lack of price competition due to difficult new entry into the business
? Prices are not negotiated by the grieving family
As a result, the failure rate in this industry is extremely low. In fact, it is one-tenth the rate of all U.S. businesses. Currently, the four major firms are Service Corporation, Loewen, Stewart Enterprises and Carriage Services.
The growth of Loewen Group, Inc. was attained by acquiring and consolidating funeral homes. To accomplish this, the company utilized debt financing. This resulted in amassing a $2.3 billion debt by 1999. Decreasing death rates led to decreased revenue. All this had a domino effe ...