The Loewen Group Case Essay

The Loewen Group Circumstance

The Loewen Group is a second largest death care company in North America. In 1999, it has held over 1100 funeral homes and more than 400 cemeteries in the U. S and Canada through aggressively attaining other small independent companies in densely pullulated metropolitan markets. Loewen's revenue and profits skilled explosive expansion in early 1990s since its synergy strategy prevailed over years. However , its acquisition enlargement were intensely financed indebted, bringing big pressure about payments of interests and matured rules. What is worse, under the low death level circumstances, Loewen Group's organization performed much less well not surprisingly in 1997 and 98. As a result, the stock price dropped to $1. 93 and relationship rate was lowered to B-. As a result of aggressive leverage acquisitions, Loewen Group grew quickly through early nineties. First of all, Loewen's gross margin and net profit margin did not reduce with hundreds of acquisitions though the whole market is fragmented. At the same time, Loewen's revenue and net earnings increased yearly by 47% and 49% (Exhibt) respectively proving the fact that synergy technique had succeeded through controlling the fixed expense and varying cost. It might also make full use of the utilities and gain potential bargain for materials from suppliers. Second, the method of loans was the key to acquire firms and got growing. From 1989-1995, Net proceeds from financing increased almost 80 percent percent annually, giving the business enough funds to acquire and expand. Consequently , with the two reasons discussed above, the business grew quickly during early on 1990s. Although Loewen had a sweet period through crazy acquisition, this left hidden danger. All of a sudden, the situation was opposite as well as the company met tremendous issues. First of all, Loewen paid $165 million dollars to settle lawsuits in 1996 resulting a bad net income. In that case, with the loss of life rate reduced during 1997 and 98, Loewen's revenue did not boost as fast as...

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