The legal cannabis sector is BIG business! It’s not dime bags and joints being sold at local shops. Within this sector, there are many multimillion-dollar mergers taking place. For example, just recently, Acreage Holdings made a $160 million all-stock acquisition of an Oregon-based cannabis co-packer, distributor and manufacturer called Form Factory. With the rapid growth of the Cannabis industry, these multimillion-dollar mergers are becoming more common.
Here are some of the key takeaways that any business looking to make a merger or acquisition in the cannabis space should take into consideration.
Key Takeaways to Consider
Companies considering large-scale investments in the cannabis sector should understand regulations. More specifically, they should thoroughly understand regulations in the geographic areas they’re considering making the investment in. Knowing the regulations that the company operates by and how those regulations have affected the businesses operating history is critical knowledge for any successful merger or acquisition.
Be sure that you know the status of a business license before purchasing or making any form of a merger in the cannabis industry.
Understanding the history of the business is essential for success.
Purchase and Transaction Arrangements
A clear understanding of the purchase price should be a given. However, this can be a little more complex than what some might think. It all depends on the liabilities, assets, and type of transaction taking place. For example, it could be an all-cash transaction, and all stock acquisition, or a combination of both cash and stock.
Consider Taxes Beforehand
By having the proper advisors steer you in the right direction, you can be sure that the transaction has been structured most favorably to support the best tax situation. There’s no need in paying more taxes than what is necessary.
Key Employee Retention After Mergers and Acquisitions
Finally take into consideration the integration of key employees post-closing. Retaining employees is a good idea for anyone making a merger or acquisition in the cannabis sector.
If your business is considering making an acquisition or merger in the cannabis sector, it’s advisable that you seek professional advice from a reputable full-service law firm in the area(s) you’re looking at making your merger or acquisition.