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Cannabis IPO Due Diligence

GreenGrowth CPAs conducts due diligence reporting. This usually happens when someone is looking to buy or sell a company to ensure that the financials are correct. Sometimes passive investors will request a due diligence report to check out the management of the company as well. Due diligence is especially important in this industry. You must make sure the company that you’re purchasing is legitimate and who they represent themselves to be. Take the time to evaluate many aspects of the business to make sure that it has the expected cash on hand, requisite licenses, records of taxes paid, and capitalized assets that are really in the building.

Cannabis Mergers and Acquisitions: Pt.1 Due Diligence

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What is Due Diligence?

Due diligence is a process you must perform before you make an offer: what you find during this procedure will likely impact what and how much you offer in the merger deal. For example, if you find certain things are not represented truthfully, or there is significantly less documentation than you expected, this will create uncertainty in your mind. In response to that uncertainty, you may ask for a lower price than previously discussed – and the magnitude of that price break depends on the materiality of what you find. If you’re a cannabis operator who envisions selling their business one day, there are steps you can take now to improve and preserve your business’s value. We highly suggest that you implement strict record-keeping and documentation for all aspects of your business. The more documents that you have to back up what you are claiming to be true, the stronger the case you have to ask for a price premium. The documentation you should maintain includes financial reporting documents, contracts with suppliers and buyers, granular POS data, fixed asset registers, inventory reports and more. Before you make an M&A offer, assemble a team to come and review the cannabis company you are seeking to purchase on your behalf (if you aren’t performing the due diligence yourself). Typically, this team is composed of lawyers, CPAs, operations engineers and any other experts who can help you draw insights about the state of the company you’re purchasing.

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