The national cremation rate passed 50% some time ago but Foundation Partners Group has that beat by a whole lot.
Companywide, the com-pany is approaching a 90% cremation rate – and it’s confident it’s playing a winning hand with its cremation-heavy focus, according to Thomas Kominsky, chief financial officer of the company, which was founded in 2010 and now serves more than 85,000 families annually in 21 states.
Pending some acquisitions and going into next year, the number of families that FPG serves per year will end up being closer to 100,000, he says, which would put the firm in select company with the likes of Park Lawn Corp., Carriage Services StoneMor Partners – all publicly traded and all far behind Service Corporation International on that metric.
With its heavy cremation focus, however, Kominsky points out that FPG’s is quite different than others in the space. The firm serves families that want premium services, mid-tier services as well as what many refer to as “direct cremation” families, he says.
FPG is backed by Access Holdings, a Baltimore-based middle-market investment and firm with over $1.5 billion in assets under management.
“Access Holdings believes in the team and believes in the strategy,” Kominsky says, noting that even if another equity holder is brought in, “Access will be around for the long term because they believe in what we are doing and how we are changing the industry.” He adds, “If you are a private equity guy, there are not a lot of opportunities in this profession like Foundation Partners Group that have this unique opportunity to drive and lead innovation and change in this industry. We think we have that because we are cremation first.”
Asked when FPG made a purposeful pivot to acquire firms with a high cremation rate, Kominsky says it was in 2015 or 2016. “We still certainly have more traditional funeral homes in more traditional parts of the country, but our goal is to focus on cremation heavy markets,” he says, noting that statistics from the Cremation Association of American predict that by 2030, the national cremation rate will hit 70%.
Looking back at FPG’s acquisition activity in 2021, Kominsky notes the company entered Nevada with its purchase of Kraft-Sussman Funeral & Cremation Service in Las Vegas, which is one of the highest-cremation areas in the country. “They have done a tremendous job building their business up over the past several years – and that is certainly a market we will continue to build density in,” he says.
Other areas where FPG would be likely to acquire more firms include the Northwest and the Southwest, he notes. Most likely, the company will stay away from the mid part of the country “until you get into the Great Lakes and our assets in Minnesota,” he says.
While FPG does not have a CEO, Kent Robertson, president and chief operations officer, is the company’s leader, Kominsky says.
He notes that Bob Bukala retired as CEO at the beginning of the year and is still a tremendous resource as vice chairman.
While some may think of FPG as a company without a lot of funeral directors in its executive ranks, Kominsky points out that Andrew Clark, chief customer officer, started off as a funeral director. “And if you look at the bench of who we have on our operations side, there are people who have been in the profession their whole lives,” he says.
The company also has an advisory board with big names, including Isabel Vieira, Kevin Waterston, Peter J. Rose, Chad Frye, Cole Waybright, Tim Coffelt and Stephen J. Marana Jr. “Anytime you create a feedback group with successful people in the industry – it doesn’t matter what industry – and you have a voice to the customer, you are going to win,” Kominsky says.
The board, Kominsky says, acts as a sounding board for company leaders whenever they are thinking about launching services and products. They help determine what consumers want and what they need.
Responding to COVID-19
Like every other company, FPG has had to pivot because of COVID-19.
“The biggest change for us from a home office standpoint is the pivot to a hybrid-type work environment,” Kominsky says. “I think that the nice thing for FPG is we’ve found we could change the way we are doing business to better serve field operations on a hybrid basis.”
As a result, the company has been able to attract a higher caliber of talent than ever before, Kominsky says. “It broke down the old way of doing business,” he says, noting that company leaders asked if they could do things better.
“Because we are all connected on Zoom and Microsoft Teams, we do a great job in ensuring we are overcom-municating,” he says. But from a field standpoint, the pandemic has certainly posed challenges, he says. “The biggest challenge is how do you continue to focus on serving families because we are in an environment that may preclude you from doing it,” he says, noting that a location can be hit hard if staff members get sick.
“For us, we found we were able to pivot to a virtual type of arranging in certain locations,” he says. “It was what the consumer wanted … I think we will be in this hybrid-type environment forever.”
While FPG was already ahead of the curve in how it leveraged technology, the pandemic has been a “catalyst change agent,” Kominsky says. It has forced people to change the way they do business – or it has been a mechanism to drive change, he says.
“I think our profession overall has banded together to say, ‘How do we serve families through this?’ There has just been a lot of collaboration around the tools of we can use to get through this together,” Kominsky says. “That is my takeaway from COVID-19 – this notion of unity in how can we get through this together – how can we share best practices?”
The pandemic did slow down acquisition activity during the first six months of 2020, Kominsky says.
“Everyone was trying to figure out what was going on in the world, but once people got their sea legs, things settled down a little bit and we figured out how to operate in this new normal,” he says. “So, we were able to close eight acquisitions last year – and we will probably more than double that this year.”
The biggest challenge for FPG in terms of acquiring firms has been to determine how COVID-19 may have affected the business of an acquisition candidate, he says.
FPG always takes a good look at the cremation rate and whether the firm is a leader and an innovator, Kominsky says. “Whether we find someone or they find us, the important part is finding each other because we are like minded in how we are thinking about the world,” he says.
With people having adjusted to COVID-19, acquisition activity may also pick up because of chatter about potential changes in the capital gains tax, Kominsky says. “There is a ton of rhetoric around tax changes and the implications on owners of businesses,” he says. “You don’t need to go far to see it as a headline in the Wall Street Journal.”
Tax policy changes could stifle activity for a quarter or two, but “owners focused on succession planning will find a way to make it happen,” Kominsky says. “I don’t think we will have to wait four years to see it pick up again – it would be just a blip.”
“In 2020, the theme for the whole profession was a loss of memorial services due to gathering and place restrictions and cultural apprehension of gathering in one place,” he says. “But in 2021, it has been a return to services,” he says.
FPG has an advantage because it has a national footprint, and it can overlay what it’s seeing in its existing businesses to compare it with how a potential acquisition fits that framework, Kominsky says. “Some other national guys can do that, too – it helps us in having transparent conversations,” he says.
Moving forward, the focus for FPG in responding to COVID-19 will be to digitally engage with families and “meet consumers where they are,” Kominsky says.
Right now, that’s right in the living room of families, Kominsky he notes.