Cannabis Q&A: What do purchasers need to consider when buying a cannabusiness? 

July 15, 2021

Jennifer Gumer Partner Headshot

Welcome to our Q&A with partner, Jennifer Gumer!

As a partner at CGL and our Regulatory and Compliance Practice Lead, Jennifer provides strategic counseling, practical advice, and expert advocacy to clients with production needs. As an Adjunct Professor of Law and Bioethics, she is uniquely qualified to handle all interactions with federal, state, and local regulators who oversee product development, manufacturing, and marketing activities, including the FDA and Local Hemp Regulators.

Q: What do purchasers need to consider when buying a cannabusiness?

A: We made the news recently with our participation in the $43.5 million acquisition of Sublime by Harborside. So, we thought it would be timely for us to outline our top things for purchasers to consider when buying a cannabusiness. Here are a few things you should look out for:  

  • Prior tax compliance. Cannabusiness owners have extensive tax compliance obligations. You should ensure your accountants take a good look at the business finances to ensure compliance with tax obligations before negotiating your purchase price.  
  • Current operational compliance. Local and state licensing and compliance requires extensive paperwork to be submitted – and you need to comply with the operational processes and procedures outlined in that paperwork. You should get access to copies of the licensing documents from the current owner. Then, ensure they’re doing what they said they would when applying for the license. If they aren’t, you may need to make costly changes to ensure compliance. You may even lose the license.    
  • Good relationships with landlords. Cannabis retailer licenses are tied to the physical location of the store. If the business you’re purchasing doesn’t include ownership of the physical property, enquire about the landlord. Ask whether they’ve let you make improvements to the property and whether they’ve been reasonable in their rent negotiations. Landlords wield a great deal of power over cannabusiness owners, and it’s worth making sure the relationship is intact.  

Key Takeaway: Your due diligence requirements when purchasing a cannabis business will be very extensive, but doing it right from the outset can help to mitigate potential future costs.  Work with an attorney with experience managing the purchase of cannabis businesses to ensure you ask the right questions. Your regulatory counsel can also help ensure you have appropriate contracts and documents in place.  

Disclaimer

The materials available at this website are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to this website or any of the e-mail links contained within the site do not create an attorney-client relationship between CGL and the user or browser. The opinions expressed at or through this site are the opinions of the individual author and may not reflect the opinions of the firm or any individual attorney.

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