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Home > Archives for winter park

Marketing a Cannabis Company for Sale, Part 2 – Put Your Team in Place

February 6, 2019

Since we’re just coming off the Super Bowl, let’s use a football analogy. Tom Brady needs all of his players to win the game, despite being called the Greatest of All Time. You should have a team behind you as well when thinking about M&A. We talked with Cannabis Business Executive on this topic – Part 2 of a 5-part series…

Marketing a Cannabis Company for Sale, Part 2

February 5, 2019

Step 2: Put Your Team in Place

In the series “Marketing a Cannabis Company for Sale,” Dena Jalbert walks through the nuances and intricacies involved in preparing a business for sale in the cannabis industry. This article, “Step 2: Put Your Team in Place,” is part two of a five-part series.

After mapping out your strategy for selling your cannabis business – which involves determining your vision for post-sale outcomes, identifying the characteristics of the ideal buyer and analyzing industry market trends – the next step in marketing your cannabis company for sale is to assemble your mergers and acquisitions (M&A) team. This is the most important step in the process, as your M&A team will be the chief architect of the deal-making process.

Cannabis companies typically fall into the lower middle market (companies with annual revenue between $1 million and $100 million) due to the industry’s youth. Therefore, a small, experienced, highly nimble M&A team is the best fit to handle deal planning, a process that includes initial screening, legal structure and finance. Two major considerations for selecting the right M&A team should be their level of experience in, and understanding of, the cannabis industry and their ability to execute the deal while staying true to your company’s core values.

A typical deal takes more than 1,000 hours and around six months to execute. However, there is nothing typical about the cannabis industry. These hours include everything from researching the market, reaching out to potential investors and buyers, fielding and advising on offers, determining the best offers, negotiating with potential buyers and executing the contract process.

Because the cannabis industry is a new and highly specialized industry, it is important to select members of your M&A team who are knowledgeable about the many nuances of this rapidly developing industry. Key members of your M&A team should include:

M&A Advisor

The main role of your M&A advisor is to prepare and help execute your selling strategy. This function ranges from designing the overall exit strategy to ensuring your business is capable of executing due diligence. Your M&A advisor is involved in every part of the deal, and helps keep the company owner and executive team updated on all developments. On the front lines of any sale talks, your M&A advisor will also help you navigate the consolidation of your company’s culture and internal systems with that of the buyer. Most deals in this space move rapidly, and a good M&A advisor can help you do the necessary vetting that will keep deals on pace close as seamlessly and quickly as possible.

Legal Advisor

Your M&A team should include an attorney well-informed of the nuances of the cannabis industry and with a deep understanding of M&A. Not all firms specialize in both — so do your research. For example, an attorney who knows the cannabis industry can help you determine if your buyer has the right licenses, is a buyer who you will be able to transfer your license to, and can help you with the transfer of licenses. Each state has different regulations around the who, the what and the where of licensing, and a legal advisor with cannabis industry experience should be engaged early in the deal to evaluate the ability of licenses to transfer seamlessly.

CPA

The CPA on your M&A team ensures that your financial statements fit within the generally accepted accounting principles (GAAP), and makes sure your tax compliance filings are complete and accurate. Beyond these accounting functions, your CPA will need to be nuanced in the cannabis industry. Taxes, in particular, are very complicated — employer and income — depending on the state where you are located. Your CPA will also need to be with familiar federal tax code related to the cannabis industry. This includes section 280e of the Internal Revenue code, which forbids state-legal cannabis businesses from deducting otherwise ordinary business expenses from gross income associated with Schedule I substances.

When selling your cannabis business, you should never go it alone. As a business owner, you likely don’t have 1,000 hours or more to devote to executing the sale of your company, and need the support and guidance offered by a strong M&A team. The work of a good M&A team does not end when the deal closes. Your M&A team should also provide support for integrating entities after the sale closes, which is when the hard work of combining two businesses really begins. The integration of a seller’s team with an acquirer’s team to work together to grow the company is common in the cannabis industry due to the newness of the industry and the difficulty finding people with industry expertise.

The cannabis industry will continue to grow and then likely consolidate, making 2019 another big year for industry mergers and acquisitions. As part of this trend, companies will continue to explore buying or selling opportunities and look for the best fit to create new companies with higher valuations. This year will also see some big players, including food, tobacco and pharmaceutical companies, enter the market, forever changing the current small, independent business characteristics of this industry. As more deals are executed in this space and you look to sell your cannabis business, make sure you put the right team in place so that your deal is not one of the 70 percent of all M&A deals that fail.

Originally published on Cannabis Business Executive:

https://www.cannabisbusinessexecutive.com/2019/02/marketing-a-cannabis-company-for-sale-part-2/?fbclid=IwAR1Egayp4b8P519FogBE7PdQcxvqPoKu9SH2gdbGm8ee_DP7KZdPMYusGiw

Filed Under: Business, Cannabis, Mergers & Acquisitions Tagged With: acquisition, cannabis, chief executive, funding, growth, investment, lower middle market, M&A, M&A advisor, M&A intermediary, merger, mergers and acquisitions, middle market, orlando, private equity, startups, succession, transition, weed, winter park

MJBulls Podcast 0051 “Ca$hing Out” Investor “Bull” Week 7

December 23, 2018

MJBulls Podcast 0051 “Ca$hing Out” Investor “Bull” Week 7

https://alignba.com/wp-content/uploads/2020/04/MJBulls_0051_Cashing_Out_Week_07_f.mp3

 

 

Podcast originally released December 23rd, 2018: https://www.mjbulls.com/

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#cannabis #AlignBusinessAdvisoryServices #MJBulls #Podcast #MandA #MergersAndAcquisitions #Align #Acquisition #Merger

 

 

Filed Under: Business, Cannabis, Mergers & Acquisitions Tagged With: acquisition, cannabis, cwcbe, entrepreneur, funding, green entrepreneur, investment, los angeles, M&A, M&A advisor, M&A intermediary, merger, orlando, seed, startups, venture capital, winter park

Marketing a Cannabis Company for Sale – Step 1: Define Your Strategy

December 20, 2018

Article originally published December 19th, 2018, in Cannabis Business Executive:  https://www.cannabisbusinessexecutive.com/2018/12/marketing-a-cannabis-company-for-sale/

Marketing a Cannabis Company for Sale

Step 1: Define Your Strategy

In the series “Marketing a Cannabis Company for Sale,” Dena Jalbert walks through the nuances and intricacies involved in preparing a business for sale in the cannabis industry. This article, “Step 1: Define Your Strategy,” is part one of a five-part series.

Whether a company is looking to sell immediately or five years down the road, it is never too early to start the process of preparing for sale. As legalization continues to spread, the cannabis industry will see increased mergers and acquisitions (M&A) activity in the next few years. The first, and arguably the most important, step in the process of marketing a cannabis business for sale is to clearly and thoroughly define your strategy. The answer to the question “What do you want from this sale?” should be the motivation that drives the entire process.

Vision for Post-Sale

When preparing a cannabis business for sale, it is best to start where you would like the process to end. Think about your optimal position after the deal closes. Some business owners want to make a clean break and step away from the company entirely post-sale, while others desire to stay with the new entity as a part of the executive or advisory team. Understanding how you want to come out of the other end of the deal will help get the process started and help you find the right buyer.

Determining the level of involvement post-sale is a personal decision and one of the only parts of the process that a founder cannot be advised on, not even from an M&A advisor. Cannabis founders, in particular, have a strong connection with their companies because they have likely jumped through many hoops to get their business to a successful position. As a result, these business owners may find it difficult to completely walk away or accept a non-leadership role with the new entity post-sale.

Identify the Ideal Buyer

Understandably, many entrepreneurs are protective of the company they’ve worked hard to build. Regardless of the level of involvement post-sale, no business owner wants to leave their company in the wrong hands. Mark Zuckerberg famously turned down an acquisition offer for $1 billion from Yahoo! at a time when the company was not profitable and making $30 million in revenue. One of his reasons for turning down the offer was because he felt the acquirer did not have a clear vision for company.

Once you know the desired outcome of a sale, it is important to take the time to determine the characteristics of an ideal buyer. M&A deals fail 70 – 90 percent of the time; and one of the leading causes of a deal falling through is a lack of synergy between the two organizations. On the buyer’s end, it is easy to focus on the acquiring asset, but many different factors go into the success of a product or service, and the company overall. A product or service is only as good as the people, technology and company culture behind it. If a buyer does not understand the value of entire brand, the company should not be afraid to walk away from an offer.

Every cannabis company with an ultimate goal to sell or be acquired must take a deep dive into its own strengths and weaknesses. The perfect buyer will be the one who provides the most operational synergies when the two companies merge. When equipped with a clear understanding of the brand’s strengths and weaknesses, you’ll be able to recognize the traits in a buyer that can further strengthen the company. Remember that “weaknesses” in your company are really opportunities for growth that can be addressed once the business gains access to the buyer’s resources, like HR support and suppliers.

Because operational skills are not widely taught or trained yet, people are one of the most valuable assets for cannabis companies. Keep your people in mind when defining the ideal buyer. If a pivotal part of a company’s success is the open-door policy for employee issues, then possibly merging with a company that has an extensive chain of command and a lack of similar policies could cause friction when the companies merge.

Analyze the Industry and Note Market Trends

For any company, but especially cannabis companies, an understanding of the current market is vital in defining your strategy. The industry is truly unique, with no other industry even remotely similar in nature. Additionally, the cannabis industry is young, as the legalization of recreational and medical use has only existed for a few years.

Timing can be a determining factor in the success of a sale, as the cannabis industry is constantly changing and evolving. The legislative climate will weigh heavily when a brand is deciding whether it is the right time to sell or buy. As U.S. states continue to legalize marijuana, the markets will continue to open up.

Cannabis business owners should understand how an exponential growth in the market, or additional legal restrictions, would impact its company. Even if a company is based in the U.S., it should note how markets in other countries react to legalization. The response in Canada after its nationwide legalization of recreational use is a good indicator of how U.S. markets may respond if similar legislation passed.

More than 145 cannabis mergers and acquisitions were announced in the first half of 2018, almost double the activity seen in the previous year. Additionally, the largest cannabis acquisition to date occurred in July when Aurora Cannabis acquired MedReleaf for CA$3.2 billion ($2.3 billion in U.S. dollars). While 2018 was a huge year for M&A in the cannabis industry, 2019 is set to be an even bigger year. Every cannabis company looking to sell in the future should begin the process now by defining its strategy.

Filed Under: Business, Cannabis, Mergers & Acquisitions Tagged With: acquisition, cannabis, chief executive, funding, growth, investment, lower middle market, M&A, M&A advisor, M&A intermediary, merger, mergers and acquisitions, middle market, orlando, private equity, startups, succession, transition, weed, winter park

MJBulls Podcast 0044 “Ca$hing Out” Investor “Bull” and Stock Purchases: Week 5

December 10, 2018

“Ca$hing Out” Investor “Bull” and Stock Purchases: Week 5

https://alignba.com/wp-content/uploads/2020/04/MJBulls_0045_cashing_out_week_05_f2.mp3

 

 

Podcast originally released December 9th, 2018: https://www.mjbulls.com/

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#cannabis #AlignBusinessAdvisoryServices #MJBulls #Podcast #MandA #MergersAndAcquisitions #Align #Acquisition #Merger

 

 

Filed Under: Business, Cannabis, Mergers & Acquisitions Tagged With: acquisition, cannabis, cwcbe, entrepreneur, funding, green entrepreneur, investment, los angeles, M&A, M&A advisor, M&A intermediary, merger, orlando, seed, startups, venture capital, winter park

MJBullsPodcast 0040: “Ca$hing Out” Bulls and NDA’s Week 4

December 3, 2018

“Ca$hing Out”  – Bulls and NDA’s Week 4

https://alignba.com/wp-content/uploads/2020/04/MJBulls_0040_Cashing_Out_Week_4_f.mp3

 

 

Podcast originally released December 2nd, 2018: https://www.mjbulls.com/

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#cannabis #AlignBusinessAdvisoryServices #MJBulls #Podcast #MandA #MergersAndAcquisitions #Align #Acquisition #Merger

 

 

Filed Under: Business, Cannabis, Mergers & Acquisitions Tagged With: acquisition, cannabis, cwcbe, entrepreneur, funding, green entrepreneur, investment, los angeles, M&A, M&A advisor, M&A intermediary, merger, orlando, seed, startups, venture capital, winter park

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