Marijuana Business Magazine October 2018

A s merger and acquisition activity accelerates across the cannabis industry, many companies are discovering that they don’t need a for-sale sign in the window to be a takeover target. The flurry of M&A activity, which is on pace to double this year, is giving more company founders a chance to cash out at an attractive price after years of working 24/7 to build their businesses. It also can provide founders with a hefty pot of cash to launch their next venture. “I never imagined that I would sell this company just two years after we launched it,” said Mason Levy, co- founder of cannabis tech app WeGrow, an educational platform for home grow- ers. “I was dead set on being with the company for decades.” That plan changed after the company was approached by VividGro, a Rhode Island lighting solutions firm that had been using the WeGrow platform for its customers and wanted the technol- ogy for its own use. After months of negotiating, legal work and financial audits, Levy and business partner Rodolfo Ramirez sold to VividGro for an undisclosed price. “It gave us a nice cash infusion,” Levy said of what prompted the partners to sell. Additionally, the deal allowed the team to focus full time on their chatbot tech startup, Swivl. For well-positioned companies, the M&A landscape provides an opportunity to take their businesses to the next level. As more companies become poten- tial acquisition targets, here are five key steps businesses and their founders should consider before a buyer comes knocking on the door. 1. Seek Competing Suitors For firms on the selling side, creating competition among prospective buyers is critical to commanding the best price, said Scott Greiper, president of Viridian Capital Advisors, a New York company that tracks M&A activity and represents buyers and sellers across the industry. “You never want to engage just one buyer initially,” Greiper said. “When we launch an assignment representing a seller, we put together a universe of buyers – 50 to 60, that is large enough to create competition.” Second to competition, he added, is time. “You cannot allow a buyer to wait you out so you become a desperate seller,” he EXECUTIVE SUMMARY Company founders are discovering that everyone is a potential takeover target as acquisition activity accelerates across the cannabis industry. How do you plan for your exit or position your company to be a top takeover target? Experts and those who’ve been there share these tips: • Create competition from prospective buyers to command the best price. • Know your firm’s worth by pricing out your company’s potential opportunity, tapping accounting experts to help you run the numbers and paying close attention to deals already under way. • Implement good governance and financial controls to avoid creating headaches for a potential acquirer. • Consider using a business broker to negotiate the best deal terms and price on your behalf. Mason Levy is co-founder of cannabis tech app WeGrow. Photo courtesy of WeGrow October 2018 • Marijuana Business Magazine • 41