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How to prepare your business for the coming cannabis consolidation

By
Stephen Miles
December 22, 2020

Steps companies should take to prepare for market consolidation

Sharp hosted a live webinar Thursday, November 12, 2020 to discuss the current state of consolidation in the cannabis industry

Moderated by Steve Miles, Co-Founder & CEO of Sharp and Co-Founder & Managing Partner of Livingstone Partners, the 45-minute webinar focused on market consolidation and what owner/operators could do to prepare their businesses for the coming M&A onslaught.

Panelists included: 

  • Joe Caltabiano, Co-Founder | Cresco Labs
  • Greg Chin, Partner | CohnReznik
  • Michael Schwamm, Partner | Duane Morris

As with most nascent, capital-intensive industries, cannabis will undoubtedly consolidate as it matures. Indeed, it is already happening in the mature adult-use markets, such as Colorado, Oregon, California, and Washington.

In mature markets such as these, Darwinism comes into play, and only the strongest survive. Every operator must ask themselves, am I a consolidator or a consolidatee?

If you are a consolidator, you need to have a sufficiently strong balance sheet and extraordinary access to capital to be ready to acquire smaller operators aggressively. If you are a consolidatee, it is time to get your house in order and start marketing your business to your state's consolidators.

Time is of the essence.

If you intend to be a consolidator but show up late to the party, you can assume you will be on the outside looking in, with only the weakest targets still available. Similarly, those operators who conclude that selling into the consolidation is the best course of action would be wise to move quickly, as purchase prices tend to peak early on in consolidation waves, with prospective targets late to the game finding a market with buyers less likely to "pay up" for good assets.

One fact is for sure, in the end there will be a finite number of uber-efficient operators in your state. One axiom has always proven true in such markets, "either you're growing or you're dying." And why die when you can sell and monetize the value you have worked hard to create?

The webinar sought to provide context to the current markets and provide recommendations about what owners should do now for a smoother sell - or capital raise - in the future.

View or listen to the webinar recording and download additional resources below.

Authors:
Rebecca Hawkinson
Steven Ernest
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