Within the last several years since legalization in Colorado, the cannabis industry has seen impressive growth. With growth, comes a rapid speed of change in any industry. Generally made up of smaller businesses, the cannabis industry seems to be gaining speed towards larger, consolidated businesses. This is characterized by mergers and acquisitions.
Larger, more established businesses tend to acquire or merge with smaller businesses, such is the nature of the free market. However, entering into a merger or acquisition isn't a small feat. Understanding timing and market fluctuations is pertinent to any industry, including cannabis, in order to ensure the process is favorable and a smooth transition. When companies merge or consolidate, every aspect of that business needs to be blended and will come under scrutiny.
That's why it's important to understand every aspect of your business, from COGS to payroll, to cash on hand. Having an accurate understanding of these numbers will help you better understand what a merger could offer in advantages, and any downside that could occur from becoming larger through a merger & acquisition. Cannabis, as an industry, certainly has specific challenges that other industries will not.
Doing your due diligence is not only best for your company, but the company you are entering into discussions with. It's best to be as transparent as possible, as any hidden aspect will come out eventually. This ensures everyone is on the same page and the basis for negotiation can come from a positive place, a step that is crucial to forming good business relationships.