cannabis mergers & acquisitions
CPA services
The dirt
Without a doubt, the merger and acquisition scene is booming in the cannabis sector. Large multi state operator cannabis companies such as Cronos Group are looking to gobble up market share and are willing to pay a premium for location and licenses. Smaller companies are either looking to position themselves to be bought, or are preparing for the inevitable price crunch once larger companies consolidate their position. Market sentiment is extremely strong as valuations for cannabis companies are through the roof. Many publicly traded cannabis businesses are worth hundreds of millions despite are operating at a net loss. Investors have made it clear - they believe the expansion of the cannabis market in the coming years will be so lucrative that they are willing to overpay for established businesses just to get their foot in a certain market.
Specific mergers & acquisition services we offer:
+ Research
For companies that have an interest in initiating a business combination but are not sure where to start looking, Greenbooks can help provide the preliminary research into potential companies. The first step is to set clearly defined goals of what the business combination hopes to accomplish. Then, we will narrow down the candidates by factors both the client as well as ourselves think are important - factors such as size, market, services provided, jurisdictions operated in etc. This will ultimately yield a handful of companies for us to further evaluate.
+ Fair Market Value and Goodwill Calculations
The first step in any merger or acquisition business combination is to identify the acquirer. This is typically the company that has a higher fair value of assets, is giving up cash or whose management is the dominant party in the transaction. Once this is decided, the fair market value of the acquiree's assets must be measured. Any payment above and beyond the fair market value of the assets is going to be donated as Goodwill in the accounting world - basically how much additional is the acquirer paying to take control of the company instead of just buying their assets on the open market. Goodwill must be regularly tested for impairment - a calculation to determine if the acquirer is still reaping benefit from their over-payment.
+ Prospective Consolidated Financial Statements
Understanding the net impact of a business combination should be the final goal prior to the execution of any M&A deal. Clients often request a prospective combined financial statement - a snapshot of the companies performance once the deal is executed. Putting this together involves a variety of factors including accounting entries to account for all entities, considering synergies between company's supply chains and more.
+ Why Choose Green Books
The difficulty of a M&A transaction can be summed up by a single question for both buyer and seller: "Am I getting a good deal?". Whether your organization is in serious discussions with another company for a merger or you are interested in acquiring another company and aren't quite sure where to start, Greenbooks is here to help. Our CPAs will leverage our considerable experience in the cannabis industry to assist you in research, fair market valuations, goodwill calculations and all of the other financials that come with a successful business combination.
Take a look:
The cannabis world is ablaze with mergers and acquisitions. The below viz showcases a sample calculation of Goodwill when purchase of XYZ Company occurs. Play around with the Entity Multiple and Fair Market Value Approach to get an idea of how these factors could impact how much Goodwill will be capitalized in this purchase.
