This special presentation from MGO comes from Benzinga’s Virtual Cannabis Capital Conference that took place on October 15. Click here for more coverage of this event with presentations from some of the top CEOs, investors and lenders in the cannabis space.
As one of the first national public accounting and consulting firms to develop solutions for the cannabis and hemp industries, MGO is a major player. Their clients range from start-ups to some of the largest publicly traded cannabis companies, including MedMen (OTC:MMNWF) and Trulieve Cannabis Corp (OTC:TCNNF). The company currently has offices in California, Illinois, New York, Florida as well as overseas ‒ primarily in India.
All in all, they’ve worked with over 400 companies on projects such as go-public transactions, equity and debt financing, operational control improvements, and mergers and acquisitions.
In an exciting and recent development, MGO released the industry’s first-ever Cannabis M&A Field Guide. MGO developed this guide in response to the profound shift in the merger and acquisition space over the last 18-months, which has been rattled by economic upheaval and the COVID-19 crisis.
“We felt it was an appropriate time to put this out there [in order] to help people navigate the very challenging M&A environment we’re in,” said Scott Hammon, partner at MGO and one of the co-authors of the guide.
Executing An Ace M&A Deal
At only 50 pages, this guide is extremely accessible. It provides in-depth insight into best practices to help both operators and investors understand the M&A market. Each of its ten chapters is written by industry experts on topics that include, but are not limited to, M&A strategy, deal structuring, post-merger implementation, tax implications, and valuations.
So, what is the secret to executing an ace M&A deal?
“You can never be too prepared, too early,” said Sarah McGuire, director at the Chicago MGO office and another co-author of the guide. “All companies, regardless of where they are in their life cycle, [should] hire a proper accounting team that has experience working with early in life stage companies.”
As M&A deals often move very quickly, a company needs to have its records in place. McGuire went on to add that, “acquirers look for companies to demonstrate operational success and that can be proved with financials.”
It’s also essential that companies present themselves honestly and accurately to the market. McGuire suggests that companies get a quality earnings review done to set themselves apart.
Hammon highlighted having a realistic set of expectations: “If you understand, in a general range, what your value proposition is and how the market is rewarding it, that will help get a deal done.”
Above all, both McGuire and Hammon emphasize the importance of having a clear vision of what one is trying to accomplish with M&A activities. Whether that’s geographic expansion or diversifying brand portfolios, it is paramount that everyone is on the same page.
The guide is a great read for both buyers and sellers considering an M&A transaction. There’s no doubt that its knowledge will prove invaluable in the coming months and years as both McGuire and Hammon predict that there will only be more consolidation as the industry matures.
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