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MJBulls 0013 Things to Know When Raising Cannabis Capital (Part 4)

Dan Humiston: [00:00:00] Support for this show and the falling message come from Trevett Hill overseeing a cannabis investment can be time consuming and expensive. Travis Hill provides cannabis investors with an external turnaround team to help management reignite growth, for a free confidential review. Go to Trevett Hill dot com.

 Dena Jalbert: [00:00:19] That's the first question is you know we've got something good here with Company A. Your company B. And you know I think what you have would be really synergistic. Let's have a lunch. let's have a lunch and talk about it. No one has to commit to anything on the first day.

 Dan Humiston: [00:00:40] From Buminit media it's the MJ bulls podcast a show about raising Cannabis Capital.

 Dan Humiston: [00:00:49] I'm Dan Humiston And on today's show part four in our series things to know in raising Canada's capital. Deea Jalbert joins us to talk about mergers and acquisitions

[00:01:07] Do you know. Hi Dan. Today we're with Dina Dober and her company's aligned business advisory service. That's

 Dan Humiston: [00:01:14] Her Dina. We're at the Cannabis World Congress and business expo with Dana is here today to talk to us about mergers and acquisitions her company specializes in mergers and acquisitions and this is part four in our series things to know when raising Cannnabis capitol  before companies begins conversations with other companies about possible mergers and acquisitions what are some of the internal things that they should do with their company to make sure that they're ready to grow their houses all in order.

Dena Jalbert: [00:01:43] Absolutely. We always tell clients that you can never start too soon. Whatever your envisioned horizon might be. Now today is a good day as any to get started. There's a lot of preparation you can do. First thing is what's your strategy. One of the things that we asked people when we engage with them is when you close your eyes at night and you envision what you want this merger. This acquisition to be would you see what's the end goal what are you hoping to achieve through it and let that be your guiding light. Because once you know that it's pretty easy then to make decisions and plan administratively and get your house in order and get those books in right no one likes to talk about accounting but you don't get those books and records together.

 Dan Humiston: [00:02:26] That's a reoccurring theme we hear that over and over.

 Dena Jalbert: [00:02:29] Absolutely. Because it's the world of investors. They look at a historical trend to gauge future performance. And while brand and other intangibles quality of product customer base things like that are certainly very important at the end of the day the number that matters is what your profit is at least in mergers and acquisitions. Venture capital might be a little different. And so having your books and records in order is paramount it makes makes your life much easier and makes the process go smoother and you can never start too soon.

 Dan Humiston: [00:02:59] It's probably more important to have your books in order that it is the company you want to merge with or acquire because you have to start off in the right place.

 Dena Jalbert: [00:03:06] Exactly right exactly right. And if there isn't transparency in the beginning and because a merger and an acquisition is a relationship of trust really. I always tell our clients that you have to make sure that the person on the other side of the table is someone you like you know what you have beer with them. You know you have to like them. You have to feel synergistic with them more than just melding assets together to go forward relationship. And so you want them to have that same vision or believe in the vision or your visions are aligned and your your product services are synergistic whatever that might be. Goes beyond just the dollars and cents. You know at the closing table.

 Dan Humiston: [00:03:48] Probably my next question is how do you start the conversation. It's a little awkward when a merge.

 Dena Jalbert: [00:03:56] Well you know if you start from a place of strategy it's a less opportunistic sounding question because it's really you know hey we've got things that are working really well separately. I bet some of the hole would be a lot better. And here's why. One plus one is going to equal four. Exactly right. And that's why we start with strategy and what do you see and what the motivation is. Because that's how you can identify the people you want to approach. You know folks who do just kind of a big broad from the giant net out and hope to catch some fish and maybe it'll work them will put the pieces together those never work they never work. And you know you can put as much money into it and for it just not aligned for the right reasons. Motivation is truly meaningful word in these that you have to both be motivated and want the same thing. So when you approach someone or someone like ourselves approach another entity on your behalf that's the first question is you know we've got something good here with Company A. Your company B. And you know I think what you have would be really synergistic. Let's have lunch. You know let's have a lunch and talk about it. No one has to commit to anything on the first day. And sometimes it's one of those a you know timing is everything and that's the next part from a preparation perspective.

 Dena Jalbert: [00:05:13] That's why it's never too soon to start because you want to strike a transaction like that at the right time. You know so you have that lunch and maybe not today. You know maybe today is not the right time but you now have that connection you've had that initial conversation. Yeah. And so six months later the timing might be right because you landed a big new customer or they have a new distributor or something changes that. Now the timing is better I guess. And so you're. Oh great. You know hey let's kick back to that much conversation and bring it back up again.

Dan Humiston: [00:05:48] When is it a good time for bring in a professional again.

 Dena Jalbert: [00:05:51] Never too soon. We have suppliant saying just five seven years in advance while they're exit. And the reason for that is when you are in a high growth business you are so focused on that. I called the bullet train right to that bullet trains going on the tracks and it's all you can do to keep it on the tracks and keep it going in the right direction and keep it at that velocity. So then to do something like Merger any really change management effort within the organization it's really hard to do both of those things. Sure the same time well right.

 Dena Jalbert: [00:06:22] And so we'll come in and or other advisers will come in and just help me that extra bandwidth so that you can keep the bullets going but in parallel you're seeking inorganic opportunities so let's just say you know we find a target company that looks like a perfect match and we're into the negotiations we're like some of the do's and don'ts in these types of negotiations like how much can you ask for how much can you expect and how much you do share.

 Dena Jalbert: [00:06:53] There's a finesse to it for sure. You want to be transparent because trust comes from transparency even if it's a perceived not reality but it's just the perception for the other party at the table that you aren't being fully transparent. It creates that level of distrust and then it's hard to ever get that back. So that's where having good books and records you can be transparent it's open. It's OK to open up the closet. Show some skeletons. Everybody has one. No business is perfect. That's why mergers and acquisitions are so beneficial and new value is created because the combined entity tends to take care of a lot of those skeletons. Okay. So it's not necessarily something to be afraid of disclosing so it'll come out anyway. Well exactly right. It always does. And to start from that place and so you know be open and be transparent as you go to negotiate. One of the things that we are very adamant about with folks that we work with is don't be so focused or solely focused I should say on the enterprise value like what you're going to sell or merge for you know whatever that valuation you know here at the conference I've already heard it probably 20 times on the first day.

 Dena Jalbert: [00:07:59] While it's certainly very important you know you want to monetize the assets that you've built to that point in time. But what you're doing in a merger and in an acquisition is you are taking it to the next level to earn even more and to grow even more and to have more opportunity and that's what you need to focus on. And so really focusing on those synergies I mentioned earlier. Do you like the other parties oftentimes and actually read a statistic I think it was in Forbes the other day that said 70 percent of all  transactions fail within the first six to 12 months after closing. And it's because oftentimes the parties are very asset focused. They treat it like a commodity. So it's like well you've got a widget that I really want and I just get that widget. It's going to be great. But then you get that widget. But with that widget comes people and compliance and other things that are you put those two together.

 Dena Jalbert: [00:08:54] And that's I don't care how good the widget is in water or not mix exactly right is going to fall apart and that brings me right up to the next question because you hear about these match made in heaven mergers and they don't work because maybe there's a culture clash or something. Yeah.

 Dan Humiston: [00:09:09] How do you prevent that from happening and you'll be in the front and in the back.

Dena Jalbert: [00:09:13] Yeah absolutely. You have to really wrap your head around that as you go into an acquisition. If you're being acquired you say you're selling to a big publicly traded company and you've grown your company large and now they want to bring you in the fold. Being a business owner and then turning and being an employee is a very different thing. And so you know we talk to our clients about that and say you know how do you feel about that. Are you OK with that. Because if not then we should look to financial investors who will let you continue to have your autonomy. You may even be able to keep a majority ownership. And we look for a different type of partner. So that's why it's always good to know what your strategy is and what you want it to look like. We're in a perfect world. I want to stay on. I still want to have control. I want to take some money off today but then I want to grow even further with these people. Okay great. That contract is what you then to your earlier question how do you approach people. That's how you know the pool of folks to go and it's usually small a small group of folks that go have those conversations with.

 Dena Jalbert: [00:10:15] The two areas that we always see things go sideways is management. You know now you've got two management teams and who's the chief and who's the Indian for lack of a better metaphor and that needs to be defined. And what happens on day one. I always tell folks that m&a closing is much like a light switch. You just flip it and it's on and that day you get insurance in place and you now have payroll for these people. And you know if you're the acquirer. And so we work with our clients to plan for that and then for those that maybe are exiting and selling outright we. What are you going to do now. What's next for you. And do you have a plan. The just got to think through those things. And that's why I would say it's never too soon to start. All those things take time to figure out. And your answer may change over time as you get feedback from the market and see what's out there.

Dan Humiston: [00:11:15] if somebody wants to talk to youin more depth on this. How can they get a hold of you.

Dena Jalbert: [00:11:21] Well you can call or e-mail me so my e-mail direct e-mail is Jalbert JL B E R T. I always like to say Albert with a j front at aighn bas dot com. . And you know we'd love to have a conversation and see if we can be of help.

 Dan Humiston: [00:11:44] all their other information is also on the Bulls and Mbullsr website. We'll have that all up for this episode.

Dan Humiston: [00:11:50] Dena it's been great speaking with you. Thanks so much. Lot of good information. This is one area that people don't talk a lot about in this industry. Hear a lot about raising capital but we haven't really rolled into the mergers and acquisitions yet so what this is is very very valuable information about consolidation is coming.

 Dena Jalbert: [00:12:08] You know you heard Coke the other day it's just a matter of time. So it's good to understand is coming. Well good luck.

 Dan Humiston: [00:12:13] Thank you.

 Dan Humiston: [00:12:16] Hey just a quick shout out to one of our former guest Green Goddess supplies which is an online Cannabis merchandise company. Remember you can listen to that show or any of our previous podcast on iTunes.

 Dan Humiston: [00:12:30] Thanks for listening to the mjbulls podcast to learn more about today's guestor to be a guest Visit our Web site at and if you like our show give us a review on iTunes. Today's show was produced by buminit media. I'm Dan Humiston and you've been listening to mjbulls podcast.