With more states opening up to recreational cannabis and the cannabis industry developing quickly, many businesses are shifting positions and trying to claim a larger market share.
This has led to frequent mergers and acquisitions in the cannabis sector as entrepreneurs, market entrants and growing businesses look for ancillary businesses to expand.
These types of deals can be complicated and few business owners will attempt them without specialist business and legal expertise.
The cannabis business attorneys at Cannabis Law Solutions have extensive backgrounds in working with entities of all sizes to facilitate the deals required to grow businesses. Our rare combination of sensitivity to the needs of cannabis businesses and commercial expertise is precisely what leads to successful mergers and acquisitions.
Wherever you are based in the U.S., we will help you navigate the challenges associated with private equity, restructuring, corporate governance, debt management, tax ramifications, and other issues.
Corporate transactions for cannabis law
A steady flow of mergers, acquisitions, and asset sales has hit the cannabis industry as the laws are changed to expand opportunities, new players enter the market, and existing businesses grow.
As the industry continues to thrive and expand, we can expect this trend to continue across the country. And, with such major developments as businesses merging or changing hands, it is essential for the related legal challenges to be addressed.
Purchases, sales, mergers, and changes to the corporate structure of businesses are rarely straightforward in any industry. They may fundamentally change the operations and control of a business, so overlooking important details can be disastrous in the long term.
Of course, with cannabis businesses, there are additional challenges to meet. Remaining compliant with all the applicable state, federal and municipal regulations is essential to protect your business.
It helps greatly to be able to rely on lawyers who not only understand the commercial side of business transactions but know the applicable cannabis business regulations around the U.S. too.
Who do we represent?
The cannabis industry is broad and we have represented many individuals and entities during mergers and acquisitions.
This includes the following parties:
Medical and recreational dispensaries
Cultivators, producers, processors, and vendors of cannabis, CBD, and hemp products
Raw materials vendors and other suppliers to cannabis businesses (advertising, technology, security, etc.)
Commercial real estate developers as well as investors interested in leasing properties to cannabis retail companies and other projects
Private equity and venture capital funds
Insurance companies considering the risks and legal implications of insuring businesses and other efforts related to the cannabis industry
What M&A services do we provide?
We provide a range of merger and acquisition services from traditional asset sales to debt financing and company division spin-offs within the cannabis industry.
In summary, our team can help with the following:
Purchase and sale agreements
Ownership option contracts
Stock and asset transactions
Security interest agreements
As well as providing important guidance for the often-complex interactions between federal and state law, we can advise on intra-state activities as well as cross-border/interstate financing and merger and acquisition transactions.
While we handle the legal side of things, you can focus on the most important aspects of growing your business — your products, marketing, and sales.
M&A process for cannabis businesses
Most successful mergers and acquisitions follow a set process. However, there are always variations and complications. Without the insight that comes from the experience of handling similar cannabis business transactions, problems can easily arise.
The results can be extremely rewarding but without the right advice, things can go awry and expensive legal mistakes can be made.
Our qualified cannabis business lawyers will walk you through the following merger and acquisition process:
Completing paperwork: We’ll help you complete and file the extensive, detailed documents to begin the M&A process. Errors can result in unnecessary delays to the transaction or, worse, scupper the deal entirely.
Conducting negotiations: We’ll assist with negotiating the terms, payment, and structure of your merger or acquisition to avoid the common mistakes and oversights that can lead to deals that are not in your best interests.
Handling government agencies: During a merger or acquisition, a cannabis business may be flagged to government agencies, such as the Drug Enforcement Agency (DEA), Department of Agriculture (USDA) or the Food and Drug Administration (FDA). We’ll look after communications for you while you focus on other things.
Get help with a cannabis business merger or acquisition
Regardless of the type of cannabis business you own, if it is the subject of a merger or acquisition, our trusted and knowledgeable attorneys can assist.
We understand the industry and we understand the nature of M&A deals. That means we can protect your best interests at every stage of the transaction as it progresses and closes.
For informed legal advice, call 866-329-0729 for a consultationwith a knowledgeable cannabis attorney at Cannabis Law Solutions.
How will our cannabis and psychedelic business services help you
Cannabis & psychedelics business entity formation
Whether you are looking to form a limited liability company (LLC) or a corporation, our experienced business lawyers can discuss the pros and cons of both and help you incorporate your business with the optimal structure to achieve your goals.
Cannabis & psychedelics business licenses
If you want to run a cannabis or psychedelics business, you will need a valid business license issued by your state authority as well as local permits. Eligibility criteria are likely to be stringent and we can help you navigate the often-complex license application process.
Cannabis & psychedelics corporate documentation
Whether you need to prepare for a license application, transfer of business ownership, change of corporate structure, transfer business location or another business process, we can help you identify and draft the documentation you need to operate legally in your state.
Cannabis & psychedelics administrative law
State authorities watch licensed and unlicensed cannabis and psychedelics businesses closely. If you violate regulations, you could face an administrative penalty. Our attorneys can provide representation or help you prepare for an administrative hearing, settlement conference or appeal.
Cannabis & psychedelics disputes and litigation
Whether you have a dispute with another business, a legal issue with one of your partners or a licensing or administrative issue, you may need legal assistance to help resolve it. We are adept at alternative dispute resolution methods as well as civil litigation.
Cannabis & psychedelics regulatory compliance
As the cannabis and psychedelics industries emerge in states around the U.S., they are more heavily regulated than most other industries. We can help your business navigate the red tape and plan to stay on the right side of the regulatory authorities in whichever state you are based.
McKenzie and her firm were definitely awesome. She was conscientious of my money, and made efforts to let me help to decrease the expense of my case. I was not confident about my chances of success before hiring her, but once I did, I slept so much better. Definitely the best choice (and I met with a few!)
These guys rock!!! Met with McKenzie about an issue I needed some help on. She was honest, professional and gave great direction that was easy to follow and solved the problem! Legal Solutions of New Mexico conduct themselves unlike any other lawyers I’ve ever seen – starting with their website, all the way through to the personal attention they provide! They are direct and get the job done while keeping their clients interests at heart. 10/10 would recommend to anyone needing legal help.
“One of the best for sure”
McKenzie St.Denis is THE best! She’s very thorough and listens to you. She gives the best recommendation based on YOUR needs and wants. She genuinely has the clients best interest at heart—no doubt. I definitely recommend her as she has integrity—super sharp! One of the best for sure. Thank you so much, McKenzie!!!
Opening a successful and legal marijuana dispensary begins with hiring a knowledgeable cannabis attorney and learning all that you can about this industry and the applicable laws. The next step is to set up a corporate business structure and create a retail business plan, which an attorney can also help you with. You will also need to research potential locations for your business to find out where licensing is legal.
Next, obtain the necessary licensing to operate your cannabis business and ensure that your operational infrastructure follows all laws and regulations. If you are not growing or producing your products yourself, you will need to contract with cultivators and product manufacturers to supply your business.
Before you begin the process of applying for a cannabis license, you need to establish a business from which to apply. The state will not consider an application from an individual; instead, the applicant must be a business entity in good standing with the state.
Your business will begin when you choose a legal entity and file the appropriate paperwork with the Secretary of State. After that, you will file with the IRS and obtain a taxpayer identification number.
You would start with articles of incorporation and include other key corporate provisions in the bylaws that state how your company will be governed. If your business is a partnership or limited liability company, you will need an operating agreement. Depending on your line of business, you may also need other licenses to operate.
In addition, you will also need other corporate documents that the Department of Health will want to see when they are considering your cannabis application. Of importance here, your application would ask you to provide:
Your articles of incorporation
Certificate of good standing
An attorney can help you both choose the appropriate business entity and draft and file any necessary documentation. When you are seeking to enter the cannabis field, it is important to get your business formation process right to make the best possible impression on the Department of Health. Doing so will allow you to devote as much time as possible to your cannabis-related business arrangements.
As a precursor to even being able to apply for state approval of your cannabis business, you must have a properly formed business entity. As a result, the first documentation you must file is the documentation establishing your business.
Next, you will need to obtain a tax identification number by registering with the IRS. In addition, the licensing application also asks you to provide your current state business license registration.
Beyond your general business licenses, you would also need specific permission to operate a cannabis business. This involves a very strict registration process where the state will closely scrutinize your application. You can expect the state to review each of the licenses that they request since it wants to be sure that your business complies with laws before they are granted the right to operate in the cannabis industry.
Compliance means making sure that you follow the myriad of laws that apply to your state’s cannabis businesses. Further, the regulatory landscape is fast-changing as the state gains more experience overseeing the businesses.
What this means for you is that knowledge is one of the most important things that you can have. Not only do you need an expert in the current laws, but you also need to be able to anticipate future changes in the law. This means that each business needs an expert who understands the laws and can advise them as to the best means of following them.
Also, compliance also means that you have sound policies and procedures in place that govern your business. The Department of Health is already looking at your policies when they evaluate your initial application. However, they reserve the right to audit and inspect your business to verify that you are complying with the law. You should always be ready for an inspection by documenting how you are following the regulations.
The best way to show compliance is by keeping your paperwork organized and conducting your own internal audits. The Department is interested primarily in your safety procedures, so you should be ready to show how you are following your own procedures. Further, you should always reevaluate your own policies to see if there are any weaknesses or changes that can be made to strengthen them.
The major thing that the Department of Health is interested in is the safety of both the product and the operation. As a baseline, the state wants to know who all of the owners are and the people who will be working in the operation.
While there are common documents among all the application classes that the Department is seeking, there are also special requirements for each of the categories.
For example, when the Department is evaluating a manufacturing application, it will pay close attention to measures that your business takes to ensure proper hygiene and testing methods. The Department also will pay attention to the manufacturer’s procurement practice and the security of its inventory.
With regard to laboratory submissions, the focus is partially on the testing processes and equipment that the business will use. The Department wants technical, scientific details of the exact tests and the quality control that the laboratory will use for testing. The emphasis is on ensuring product safety.
For courier businesses, the Department will scrutinize the safety and security of the delivery process, including the vehicles and the delivery routes that are used. The emphasis is on the safety of qualified patients, primary caregivers, and courier staff in light of the product being delivered. In addition, since there is interaction with patients, the Department wants to see how the applicant plans on protecting patient privacy.
Cannabis legalization often works in a series of steps. Broadly speaking, cannabis policy reform occurs in the following stages:
Prohibition: Criminal penalties apply for the possession or use of cannabis.
Decriminalization: Low-level criminal penalties are removed for cannabis usage (e.g., personal possession) and criminal penalties may be replaced with civil fines.
Medical legalization: Full medical legalization with commercial licensing and testing may come straight away or in a series of stages.
Legalization: State laws are changed to make any cannabis activity a crime no longer. Cannabis must be removed from the Controlled Substances Act and new rules added for the legal commercial cultivation, distribution, testing, and sales of cannabis.
Oregon and Colorado states have decriminalized the use, sale, and possession of psilocybin, which is the active ingredient in “magic mushrooms” and has been shown to have great value in treating certain medical conditions, like depression, anxiety and life-threatening cancers.
Besides these states, the cities of Oakland and Santa Cruz in California as well as Washington, D.C., Somerville, Cambridge and Northampton (Massachusetts) have all decriminalized psilocybin.
It should be noted that all psychedelics are illegal in the United States under federal law and drugs like MDMA, DMT, ketamine, LSD and psilocybin are Schedule 1 controlled substances. This means they are viewed as having no medical purpose and no legitimate commercial application