LETTER FROM THE TEAM – September 2021 Cannabinoid Monthly Playbook

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The Question is, What Happens After You Say, “I Do” ?

As the summer winds down, what was expected to be the summer of Canna love with multiple mergers and acquisitions (M&A) didn’t happen like we thought it would. Why depends on who and what ultimately happened. What we can take from this is the conversations were happening but the details that go into these events are massive. These processes take time, and aligning two active organizations will always be a challenge, even more so in the cannabis industry. As organizations scour the marketplace looking for attractive partners to integrate into their budding, or in some cases exploding organizations, multiple factors need to be considered. Let’s say you’ve done the first part and have found your partner, you worked out the terms and you’re ready for happily ever after. The question is what happens after you say, “I DO”?

In our experience in the Cannabis M&A space, the initial step post-merger has varied across the map. Some organizations approach the relationships as independents and operate completely separate of one another. These organizations typically are adding on value services or operate in the same landscape. These types of M&A don’t typically have synergistic benefits unless combined purchasing departments take advantage of economies of scale. Please note, this is not one size fits all and every scenario is different. Two growing organizations scale better than one organization scaling on its own. The adage of more is better applies in this scenario. The other side of the coin is, we’ve seen companies acquiring others deploy a small team to the newly acquired organization. This team role is solely to align the new organization for the benefit of the synergistic efforts. To truly benefit from the combination of aligning the operations of two organizations, a detailed plan explaining the intricacies of both businesses needs to be developed and then executed.

Information transfer, reporting, SOPs, technology stack, leadership role, purchasing decisions, 3rd party resources, consultants, lawyers, a ccountant–these different areas are just a few of the many, nuanced details that arise in these acquisitions and need to align within the new organization. The challenge continues to be the speed with which the industry is moving. The C-Suite has identified a key partner and has acquired that company. If the execution team doesn’t exist, or isn’t aware of some of the key details on why and where the C-Suite found these added synergistic add-ons, then do the shareholders actually realize the value of the combined efforts?

We recommend the option of deploying a small team. In some instances, these small teams might not be available. This is where a trusted third-party resource can be make or break the M&A. Have the team audit the new operation and provide a clear roadmap for how this acquisition integrates. The goal of the team is to ensure the shareholders receive the value as originally intended. Understanding the business case and having a trusted party can be a huge difference to the alternative which is uprooting a strong employee to a new role where they may become disgruntled, frustrated or just not familiar with the necessary steps to aligning organizations. The expectation going forward is that many will try various paths forward but the end result will be across the map. Multiple alignments will be needed, and specialized resources, to help accomplish this role will continue to grow in importance.

Editors’ Note: This is an excerpt from our Monthly Playbook. If you would like to read the full monthly playbook and join the thousands of others you can sign up below.

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