New investor at LM Funerals

Ian Hancock General, Stuff

LM Funerals, a Miromedia client based in Wolverhampton, is on the acquisition trail after being taken over in a £37.5m deal, finance director Paul Moss has told Insider.

The company, one of the largest groups of funeral directors in the UK, has been acquired by a consortium led by Duke Street from private equity firm Sovereign Capital.

Operating in the Midlands and the south of England, LM Funerals was acquired by Sovereign in September 2003. The business has grown from 29 sites to 65 through nine acquisitions and branch openings.

It has now been bought by Duke Street, Babson Capital Europe and Metric Capital Partners. The exit is Sovereign’s third this year. “In 2011, we were a little bit quiet as we were waiting to resolve the exit process, but now we’re very much back on track with the acquisition programme,” finance director Moss said.

“We never took our foot completely off the pedal and we maintained contact with businesses which expresses an interest. But we needed to sort out our future funding requirement. Duke Street has answered that now, and then some.

“We’re feeling quite positive after a short period of having to sit on our hands a little bit.”

The exit represents a more than three-fold return on Sovereign’s investment. Moss added: “Sovereign got to understand the funeral market very well over a number of years.

“The firm understood the client is always uppermost in our mind no matter what decision we were making. That sympathetic approach underpins funeral businesses. We felt we needed someone else who understood this.”

Sovereign appointed Deborah Kemp, previously chief operating officer of De Vere Hotels & Resorts, as chief executive in November 2010 to continue the group’s expansion plans.

As part of this growth strategy, LM Funerals has developed its own M&A team focused on further consolidating the company’s position and extending its geographic reach.

Deborah Kemp added: “As an investor, Sovereign has been a highly supportive partner for LM throughout the duration of our relationship.

“The backing and guidance we have received has not only helped grow the business, but it has also enabled us to create a strong buy-and-build platform from which to develop and strengthen the business in what is becoming an increasingly progressive and dynamic market.

“We have high aspirations for the group moving forward, and the robust footing we have developed in recent years means that our existing collective of funeral businesses, as well as new acquisitions, will be well served.

” LM Funerals targets heritage companies which have a long history in the funeral business, which continue to trade under their original names. Previous acquisitions include Jennings Funeral Directors and William H Painter Funeral Directors.

The company, which now employs more than 200 staff, had turnover of £11.6m in the year to 30 June 2010.

Sovereign partner Kevin Whittle said: “The strong cashflows associated with the predictability of the service provision in the funeral sector have made the business an excellent fit with Sovereign’s model and we are very pleased that our commitment to the group has been rewarded with an excellent return to our investors.” SJ Berwin and PwC advised on the deal.

By Edward Devlin, Midlands Correspondent, Insider Media Limited