Making M&A Pay Off in Cannabis

The recent Organigram Inc and Vireo deals are a shot in the arm for the chastened North American cannabis sector. More M&A may be on the way. Some industry pundits predict a wave of transactions in 2025.

Within the acclaim and hope, however, lies some harsh realities.

M&A-driven growth often comes down to the presence and effectiveness of post-merger/acquisition integration efforts (PMI) by the target firm. Yes, transaction price also matters a lot but that’s for another day.

Sadly, most M&A deals do not end up hitting their financial and strategic objectives. Don’t believe me. According to the Harvard Business Review, 70-90% of all M&A transactions do not lead to accretive shareholder value.

A winning deal hinges on the ability of the acquirer to achieve 3 goals:

--> Capture anticipated sales revenue from the target while maintaining business momentum;

--> Secure cost savings through rationalizations and economies of scale;

--> Realize desired synergies like cross selling and capability enhancements.

These outcomes don’t happen on their own. In fact, it’s quite the opposite. In many cases, management doesn’t consider PMI till the deal is done. When they get around to it, the effort is often half-hearted or incomplete.

To be clear, this post is not a comment on the aforementioned transactions or the associated PMI. For the record, I like these deals and the management behind them, but I have also not looked under their respective hoods.

I have been a part of many successful M&A deals across a variety of industries - and seen my share of failures.

Here are 6 key lessons:

1) Pre closing, the acquirer should establish a specialized ‘Delta Force’ team to execute and manage the integration effort. The target firm(s) should also assemble an on-boarding team that is ready to help once the turnover begins.

2) Plan integration activities in advance. This plan should include identifying key tasks, required data & resources, and the affected departments & sites, all sequenced and road mapped.

3) Focus your value capture effort on the ‘low hanging fruit’ that yields immediate cash and generates momentum, but also don’t neglect key corporate services like HR and IT.

4) Move quickly but prudently. Be mindful of talent flight and ‘under the radar’ cultural issues like management ego and the existence of important but undocumented practices.

5) Understand the significance of clear and timely communications to your 3 key audiences: workers, customers and shareholders. Centralize this function and carefully manage key messages.

6) Report frequently on PMI progress to senior leaders and the Board. Be agile enough to pivot, if necessary.

Call me. I have deep PMI expertise that can accelerates M&A returns and mitigate risk.

#mergersandacquisitions #postmergerintegration #M&A #Vireo #Organigram