Marijuana Business Magazine

As M&A activity heats up in the cannabis industry, a look at the right and wrong ways to do a deal M a N i A C onsolidation is sweeping through the marijuana industry. Companies are snap- ping up rivals to expand their geographic footprint. Cannabis entrepreneurs are unloading their companies while their businesses are strong and can fetch a hefty price tag – a common occurrence in more mature industries. And new entrants to the MJ industry such as lawn and garden giant Scotts Miracle-Gro are buying assets to gain a toehold. According to Viridian Capital Advisors, a New York financial and strategic advisory firm focused on the cannabis industry, marijuana-related companies completed 105 merg- ers and acquisitions this year through the first week of September.That’s more than triple the 51 deals completed in the same period in 2016. Successfully completing a merger or acquisition can be challenging in any industry. But in the highly regulated cannabis sector, special care must be taken to avoid putting your company in a high-risk situation. Section 280E of the federal tax code, for example, prohibits marijuana businesses from benefits enjoyed by other companies, including tax deductions for leasing property or paying salaries. So it’s crucial to thoroughly examine tax documents when involved in a cannabis M&A deal. by Margaret Jackson November / December 2017 • Marijuana Business Magazine • 37