Providence Equity did in Church-tech What They are About to do in Death-tech. Here’s What it Looks Like…
We recently wrote about the private equity firm Providence Equity and outlined their recent activity and investments in the death care technology space (Read the article here). The private equity firm has investments in over 180 companies worldwide and maintains $60 billion in managed assets. Their sector-focused strategy is aligned with their moves in death-tech, recently taking a controlling stake in SRS Computing, Frazer Consulting, and FrontRunner Professional. We wanted to take a closer look at an industry that Providence Equity has employed their niche sector-focused strategy in the past to glean a vision of their possible future in death care.
Providence Equity rolled out an investment play in church technology that looks remarkably similar to their early moves in death technology. Starting around 2012, the private equity firm took a stake in Ministry Brands which began to rapidly acquire church technology companies and collect them separately under the umbrella company.
Ministry Brands is a collection of faith-based software products that provide services and tools including accounting, background screening, online giving, church business management, and website development. This suite of 31 technology companies is similar to the tools Providence Equity has been acquiring in death care which includes business management technologies, website development, digital memorials, client communication management, and funeral home marketing and advertising services. A major difference between church-tech and death-tech is that Ministry Brands reports that they serve 55,000+ churches while the total market share in funeral care is around 15,600 funeral homes in the U.S.
It appears that Providence equity recognized the market similarities between church and death and are aiming to replicate their strategy on a smaller scale in the funeral space.
What are Ministry Brands’ Goals?
Ministry Brands’ exit goal was clearly laid out and blatantly advertised in the media in 2016: The intention is to sell the conglomerate for $1.5 billion. As of the publishing date of this article, Providence Equity still holds a stake in Ministry Brands (according to their website) along with Genstar Capital.
Ministry Brands’ financial-focused goal is not taken lightly by the church community which by nature is highly sensitive to larger corporations’ ability to prioritize financially motivated decisions over mission-based decisions. Members of the religious community want to uphold the integrity of the industry and big companies with lots of power and intent to sell make everyone nervous.
Was Ministry Brands a success?
It depends on who you ask and the story isn’t quite over.
Ministry Brands did successfully create (and continues to build) an industry-dominating conglomerate of faith-based technology companies that, together, had an estimated $100 million in Ebitda in 2017 – That in itself is a major accomplishment. From the perspective of a private equity firm like Providence, they would likely label it a success upon selling Ministry Brands with a measurable ROI.
The employees of the acquired companies and the corporate-sensitive religious space have another perspective of the accomplishments of Ministry Brands. According to the anonymous work-place review website Glass Door, Ministry Brands’ company takeovers have been challenging for employees. The company has an overall rating of 2.2 (out of 5) stars with 70 reviews. Here are just a few of the negative reviews on Glass Door:
“Cut throat attitude. They buy smaller companies, long hours, furious pace. In four years we only got a 3% raise once. They can only keep their IT staff for about two years before they quit.”
“The consensus of my team is “do not work to hard, they will change course before you finish”. I put in an entire year working on a project only to see everyone laid off and a patchwork fix to move forward. Everyone but me who worked on the project was laid off. Now they are wondering why it does not work.”
“My company was taken over by Ministry Brands awhile back. Ever since, things have changed drastically. We were compensated so well before we had Ministry Brands and everybody’s annual raised were between 7-10%. Now that they’ve taken over, our company feels the pressure and everybody is nervous and wants to get out of here. Our budgets have been squeezed like never before. We are understaffed and our raises are only based on the mandatory cost of living adjustment, which is only 2% this year– it does not matter how well someone has performed their duties or exceeded expectations. It sounds very dishonorable to me that this is being done. Forget learning new skills. There is no tuition reimbursement whatsoever. On top of that, you will need a side hustle to save for retirement because there is no 401k match. Unless you want to be 70 years old and work at a KFC or Walmart you will not see a future here. They also do not offer any commuter benefits. You’re doomed unless you don’t act NOW. Get out of here!”
There are also a few positive reviews on Glass Door including:
“Of the many great things about Ministry Brands, the people are phenomenal and passionate about their purpose. There are many very talented technologists that I work with daily. It has the solid features of a mature organization with the entrepreneurial spirit of a start up. Leaders listen and genuinely consider the insight of their teams and they are moving their technology aggressively and progressively forward.”
To address the growing concerns of the employees speaking out online and the suspected financial-over-mission motives of Ministry Brands, COO Brad Hill appeared on the Podcast Pro Church Tools in 2017 reinforcing that:
“[Investmet captial] allows us to continue growing and serving those customers well in a sustainable way. We have brought a lot of companies into the fold that were either not profitable, or barely breaking even. That’s a very precarious place to put yourself and put your churches because they need to know that you’re going to be there to stand behind that product. So, we have the ability now to grow and invest. We are making some very significant investments, as we sit here right now. In terms of new products and new innovations that we’re working on. We’re only able to do that because we’re both running a healthy business, and we have backing of investors.”
Will Providence be able to successfully replicate their model in death care?
It’s hard to say if Providence equity will be able to successfully create a powerful conglomerate of death-tech companies. There is a specific balance of market share, quality-of-product, diversification of services, and other factors that blessed their faith-based mega-brand with power and influence.
It’s hard to find especially future-facing tech companies in death care that are ripe for investment because funeral directors are slow to adopt and are running their establishments on tight budgets… but as younger directors take management positions this will begin to change. The death-tech space has not yet reached technological maturity, in fact, I don’t think it’s even scratched the surface. So, even if Providence Equity does scoop up 31 death-tech brands and owns a sizable portion of the market it still leaves itself vulnerable to disruption by confident startups with infrastructure-shifting ideas that could render Providence’s companies obsolete within a matter of years (we’ve seen this disruption happen in many industries in the last decade). And if Ministry Brands paints an accurate picture of how Providence operates its sector-focused investment strategy, the private equity firm is not in the business of building revolutionary tools… they buy them.