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Mergers and Acquisitions: High Yields Boost Deals

Mergers and Acquisitions High Yields Boost Deals

Awaiting legalization, every week a new transformational deal was announced in the cannabis industry. With each new press release, the purchase price indicated was higher than the previous one. Indeed, companies were paying increasingly large bonuses for prospects. Whose value had yet to be proven in the recreational cannabis market. Unfortunately, in this deal fever, we often lose sight of the basic motives behind the deals and forget to put in place a concrete plan to maximize the long-term value of the Yields Boost Deals for shareholders.

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Why is this important?

Given the current fragmentation in the cannabis industry. It’s no surprise to see the buying frenzy grip companies with overflowing coffers and access to cheap capital (due to high valuations). These companies seek to achieve economies of scale. Expand their patient base, offer consumer-centric products and services, enter new markets, or acquire protected distribution channels.

As legalization approached, the size of transactions increased. One need only look at the acquisitions of licensed producer headliners. Over the past three years to see a rise in valuations. The licensed producers mainly used their strong market valuation to make their acquisitions through shares. And while transformational deals are on the rise across all industries.

The risks can be high

While mergers and acquisitions are important steps in executing a company’s strategy. The fact remains that they are just that: a means to an end. They allow the company to quickly gain ground in new markets or to overtake the competition in profitability or productivity. However, leaders must recognize that without a broader strategy that incorporates the prospect. Transactions can destroy shareholder value by squandering capital, distracting management, and failing to retain talent and talent. key relationships.

Common issues for businesses following a transaction include:

  • Inability to create revenue synergies.
  • Partial ability to create cost synergies.
  • Inefficient or incomplete integration plan.

Each of these issues can cause shareholders to lose value. It is therefore important to fully understand the contributing factors.

The integration strategy first

The gross revenue of the entity created by a transaction (merger or acquisition). Is expected to be higher than that generated by the entities independently.

Concretely, leaders must ensure that the transaction brings together product portfolios and capability systems that will not cannibalize each other. Otherwise, companies risk losing market share to their competitors. Above all, undermines their brand and public confidence in their company. For cannabis companies, in a newly legalized market, this could be devastating.

Next, focus on priority value drivers

In addition to seeking to grow revenues. Investment projects through M&A advisor aim to create significant cost synergies in the created entity, particularly in administrative functions. (e.g., procurement, finance, human resources, information technology) and assets. Hard assets, such as properties, factories, and equipment, can be rationalized, either by combining them or by closing them. And capital costs as well as the optimization of the debt/equity ratio.

To realize these synergies and establish a sustainable operating model for the created entity. The buyer must rely on the results of the due diligence to continuously validate the possibilities of synergies and understand the potential risks for the created entity. Afterward, he must deploy a structured process and appoint a team for this purpose. In an environment comprised of disparate licensed assets across Canada. Creating a plan to drive synergies without eliminating prospect value is critically important.

Manage onboarding as a business process

Despite the importance of onboarding, companies often overlook the value of an effective onboarding plan. As the size and complexity of these transactions increase, Yields Boost Deals it becomes increasingly important to have a detailed plan. As cannabis companies increasingly seek to complete transformational transactions. Executives must recognize the complexity of integrating cross-functional organizations and assets in an evolving regulatory environment. Not to mention that the internationalization of the cannabis sector leads to a greater number of cross-border transactions.

Leaders need to address human resources issues surrounding transformational transactions (e.g., employee uncertainty because of the transaction). Which arise due to a lack of harmony between stakeholders and lack of an appropriate workforce transition plan. Employees are an organization’s most valuable assets Yields Boost Deals. This is probably even more true in the cannabis sector. Where we are still building a technological framework aimed at institutionalizing knowledge. In this context, the keys to success are in the hands of employees.

Companies need to address these operational and HR issues to support business sustainability. Otherwise, the prospect’s operating model may not be agile or able to respond to industry changes, which could put the organization at risk.

Costly Mistakes

It is rare for integration to go smoothly. Indeed, we often encounter some pitfalls along the way. The role of management is to minimize risk and increase overall shareholder value. Without a plan, the risks of deteriorating margins, business disruption, and, potentially Yield Boost Deals, bankruptcy increase significantly. Aside from the obvious repercussions for the prospect and the buyer. In the rapidly changing cannabis market, these errors also allow competitors to gain market share and consolidate their position with patients. Consumers, liquor companies, and potential partners.

There is a solution

The solution? Companies should establish a tailored M&A program and use it as a resource to guide. These activities as part of corporate strategy while mitigating disruption in its core business. An M&A advisory firm provides a common point of reference for structure, planning, cooperation, and discipline throughout the deal lifecycle. This program should align with the company’s strategy and objectives, risk appetite, operational structure, culture, capability system, and stakeholder network.

M&A programs cover all stages of the transaction. From pre-deal strategy to post-deal implementation and integration, as demonstrated by our approach described below.

Transactional strategy

Every transaction begins with a strategy. The latter must align with all the other strategies of the company (global, growth, and M&A) to reinforce its global orientation. Which allows it to better choose and approach the targets. mergers and acquisitions with a view to growth.

Integrated due diligence process

Second, an integrated approach to due diligence will provide consistent insight into potential risks. As well as challenges and opportunities for the buyer before the transaction closes. The results of commercial, financial, operational, IT (including cybersecurity), and human resources due to diligence services should be discussed with all stakeholders to enable both parties to develop business cases and maximize the value of the transaction at closing.

Prospect operating model and onboarding plan

To design an effective operating model for the prospect. Both the prospect and the buyer must first examine all the elements of their strategies and identify key opportunities for consolidation and synergies. They both must take an open attitude in this process to truly understand. How the companies set themselves apart and complement each other.

At the end of the operating model design. A work integration plan should also be developed for each business line in preparation for Day 1. Delays create no value Yields Boost Deals.

Integration Management

The more complex the transaction, the greater the interactions between executives and management teams to realize the benefits. Rapid alignment of the governance structure, including roles and responsibilities in each of the fields of activity and at all levels of the organization.

Integration management should be seen as part of the organization’s business processes. Using the best tools, templates, and advisors, functional teams can track integration progress, explain it to leaders. And quickly make course corrections as needed.

Communication and change management

Finally, we can never insist enough on the cultural aspect of integrations. Any integration should be built around the corporate culture and incorporated into communication and change lean management plan. Offering comprehensive communication early in the process can help improve customer retention, employee engagement, and productivity. This can provide confidence in the overall process and facilitate decision-making. Acting as stabilizers against uncertainty, communication. And change management plans help mitigate risk by proactively responding to questions and concerns from all stakeholders.

The game is worth the candle

Planning for a prospect’s onboarding is critical to creating shareholder value. No matter how daunting the task. If the right people do it methodically with the right systems, it is not impossible. Ultimately, the benefits of successful integration can far outweigh the costs and risks of the transaction.