MJBizMag April 2021 - 60

Secondary Education
CannaMLS reports that interest from potential business buyers grew more than 400% between early 2020 and early 2021. Courtesy Photo
For sellers, advice ranges from pricing
your property right to having all your
financial disclosures in order.
Things you need to consider before
putting your marijuana operation on the
market include:
* Hire an experienced broker who can
not only sell your property but also
create advertising materials, facilitate
the signing of documents such as
nondisclosure agreements and verify
proof of funds, Green said.
* Insist potential buyers offer proof
of funds before putting a property
under contract. " Proof of funds is
usually the best way for a seller to
avoid agreeing to deals that will
never close, " Freedman said. " Many
buyers sign term sheets without
sufficient funds and then use the
term sheet to attract capital. "
* Have audited financials available,
said Alovisetti, who has structured
deals in numerous states with
medical and adult-use marijuana
industries. He noted smaller
marijuana companies might
have their financial data saved
using accounting software such
as QuickBooks, but that won't be
acceptable to a sophisticated buyer.
" A properly priced asset can attract multiple
parties, creating an auction environment that
will drive up the price naturally. "
- Christopher Stefan, cannabis broker and principal, Desarollo Real Estate
* Create a presentation deck that
includes detailed financials for
potential buyers to review. Make
the minutes of board meetings
available, Alovisetti added, so
prospective buyers understand your
corporate strategy.
Broker Stefan echoed the importance
of pricing the property right, even in a
hot market.
" It is a terrible mistake to overprice
and overexpose your asset, as it will lead
to a longer sales timeline and potentially
less proceeds, " Stefan said. " A properly
priced asset can attract multiple parties,
creating an auction environment that
will drive up the price naturally. "
BEWARE OF RED FLAGS
Both buyers and sellers need to be
looking out for danger signs. Ignorance
of regulations regarding the transfer of
license ownership and licenses that are
not are in good standing are red flags,
Green said.
60 Marijuana Business Magazine | April 2021
Additionally, liens, encumbrances
or litigation could end up being costly
headaches.
" I've seen many buyers who, a year
after buying the license, discover millions
of dollars in undisclosed tax liabilities or
have to fend off lawsuits from individuals
claiming to have an ownership interest
in the business based on a deal done a
half-decade earlier, " Freedman said.
Stefan said a way to avoid those
potential problems is to buy the assets
of the business rather than the business
itself. An experienced real estate attorney
or a knowledgeable commercial real estate
broker should be able to structure the
contract to avoid future liabilities, he said.
" You need to know who you are doing
business with, what they have done in
the past and how their other businesses
have gone, " Stefan said. " I have had clients
who are charming people with powerful
public personas that have a trail of unpaid
lenders, investors and landlords that were
never asked to give a reference. "

MJBizMag April 2021

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