Mergers and Acquisitions
Understanding the true value of a marijuana business is essential for both the buyer and the seller.
There are three basic valuation methods:
- discounted cash flow (DCF), which attempts to put a present value on anticipated future income streams;
- book value which is based upon an owner’s equity as reflected on the balance sheet, and
- liquidation value, which is the expected value of a company’s assets if there were to be a fire sale.
The method selected generally depends upon the health of the business at the time of sale, the provisions of an applicable operating agreement and whether only a minority of owners are selling.
DCF will usually produce the highest value, but it’s important to evaluate revenue numbers that are realistic.
Operators have a tendency to overstate revenue. It can also be assumed the reported number is overstated unless accompanied by actual and verified sales figures.
Sometimes, it’s necessary to evaluate a potential material change in the marketplace, like the addition or elimination of competitors, change in regulations or even change in market demand.
The sale and purchase of a licensed cannabis facility will likely necessitate a municipal and/or state license transfer.
Different municipalities accomplish this task in different ways.
Sometimes, it necessitates a stock or membership sale, and other times this isn’t necessary.
Additionally, a city often requires that a full transfer of the municipal license cannot be accomplished until the state license transfer has been accomplished.
The Cannabis Legal Group has navigated all of these situations and can expertly handle any type of license transfer.
Real Estate Purchase Agreements
The Cannabis Legal Group can draft all necessary documents to effectuate the sale or purchase of real estate including letters of intent, purchase agreements and related documents, like easements or private road agreements.
When there’s a proposed purchase or sale of real estate related to a cannabis facility, it’s important to ensure the correct provisions are properly addressed.
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