Industries

Cannabis Industry Management and Restructuring

What challenges does the cannabis industry face? Of all business sectors, the cannabis industry is one of those most fraught with potential difficulties. Its complexity is due to the legal ambiguity. In some states, marijuana is still fully illegal (as it is federally). In other states, only medical marijuana dispensaries can operate, and elsewhere, both medical and recreational cannabis businesses thrive. 

The question many business owners ask is “How to navigate the legal issues of selling cannabis across several different states?” Under federal law, it is illegal to transport cannabis across state lines. This severely limits e-commerce companies that sell directly to customers.  

This uneven legality between states causes other problems. Due to this ambiguity, not all lenders will work with cannabis companies, making it more difficult to secure funding. 

Licensing is another complex issue for cannabis businesses. Since the industry is heavily regulated, compliance regulations don’t just vary by state—they can also vary according to the business category (recreational or medical, retail dispensary or cultivation), and by what city or county it’s in.

There are also tax regulations for cannabis companies that, if not adhered to correctly, may make it difficult to sell the business. 

SierraConstellation Partners (SCP) provides cannabis management consulting in this highly nuanced industry. Our professionals have helped cannabis businesses navigate complex financial and regulatory issues, as well as more common challenges like M&A activities, business restructuring, and liquidity problems, for maximum success and profitability.  
See how our performance improvement specialist can help you optimize or restructure your cannabis business.

Cannabis Industry Interim Management

SCP can provide expert guidance to cannabis companies experiencing a leadership vacuum or operational challenges. Whether it’s a crisis, major structural change, or transition, our lean, experienced team provides interim CEO, COO, CFO, CRO, and floor-level general managerial services. SCP develops strategies and execution plans to create long-term, sustainable growth—and we put these plans into action.

When might a cannabis business need SCP’s interim management services? An executive may have left the business. There may be problems with the company’s financial reporting. A startup may be in over its head and struggling to meet financial requirements. A successful company might have grown beyond the capabilities of its existing finance and accounting team.

Cannabis Industry Financial Restructuring

How do you restructure a business that sells cannabis products? Like other businesses, they may run into cash flow issues and financial insolvency. Unlike other businesses, a cannabis company is often shut out of banking services and the ability to declare bankruptcy. This leaves them with fewer options for liquidating assets and restructuring their debts. SierraConstellation Partners works with executives to develop a restructuring strategy, lead negotiations with potential lenders, and handle refinancing transactions, among other activities.  

A cannabis business may be unable to reach financial sustainability and minimal liquidity. They may need to rebuild vendor relationships after racking up a sizeable accounts payable balance. A loan made to the company may be in default. Owners may have trouble getting cannabis business financing.

Cannabis Industry Turnaround Management

A business recovery plan includes initiatives and actions designed to help a company overcome financial difficulties, operational challenges, and performance issues. This is done before a business becomes insolvent, to reshape it to be profitable and sustainable. SCP goes much further than other financial advisory firms. We manage the company’s cash flow, re-establish credibility, propose reorganization plans, determine valuation, access financial reporting, and more.

In the cannabis sector, a company may have tried to grow more quickly than its current labor and capital resources can support. There may be cash flow limitations, accounts payable issues, or a sudden executive departure. For a public company, its share price may have declined.

Cannabis Industry Performance Improvement

Is your cannabis-related company reaching its goals? If not, SCP can help. We collaborate with management to analyze business processes and identify areas that need improvement. We use data analytics to provide actionable insights and implement strategic plans to increase productivity. We boost innovation through professional development and employee engagement strategies, monitoring these changes and guiding companies through the transition.

An organization may need this service if they’re seeing a loss in productivity, quality control issues, revenue decline, or cash flow problems. There may also be increased supply chain or operating costs cutting into profits.

Cannabis Industry Talent & Culture

It’s challenging for businesses to build a strong team. SCP’s customized talent management helps companies navigate transitions. Our experts develop strategic initiatives, guide businesses through integrations and leadership transitions, structure compensation programs, conduct risk analyses, and assist with talent acquisition.  

A cannabis business may have gone through a merger or acquisition and experienced a reduction in force (RIF). An executive, shareholder, or lender may be unsure if the current team has the necessary experience to handle a transition. There may be internal issues that must be resolved to make the team more effective.

SCP Helps Cannabis Companies Thrive

As a young industry that’s rapidly growing and evolving with many gray areas that can arise due to heavy regulations and legal ambiguity, cannabis companies are unlike any other business. SierraConstellation Partners provides expert cannabis management consulting. We have the necessary expertise to guide these unique organizations through financial uncertainties toward a successful solution. 

Don’t waste another day trying to untangle the treacherous landscape of cannabis compliance on your own. Let SCP help you to thrive by paving the way toward success.

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Case Studies

Cannabis Industry Team Members

Timothy Bossidy

Managing Director

Ben Smith

Senior Director

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Timothy Bossidy

Managing Director

Miami, FL

BiographyNotable AssignmentsMedia & Awards

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Industry Expertise

Tim Bossidy is a Managing Director at SierraConstellation Partners with a significant track record of financial and operational consulting services to companies in transition. His advisory experience extends across turnaround management, mergers and acquisitions, capital raising and conducting financial modeling and forecasting across a variety of industries including: cannabis, consumer/retail, agriculture, media/entertainment, oil and gas, healthcare tech and healthcare services.

Prior to joining SCP, Tim worked as an investment banker at Goldman Sachs. There he focused on mergers and acquisitions, alongside initial public offerings, other equity transactions and debt financing. Prior to Goldman Sachs, Tim worked as a credit analyst at The Travelers Companies, where he covered high yield and investment grade bonds across the oil and gas and municipal sectors.

In 2020, Tim received the M&A Advisor’s Emerging Leader Award, which recognizes leading M&A, financial and turnaround professionals who have reached a significant level of success while still under the age of 40.

Tim holds a bachelor’s degree in economics and English from the University of Notre Dame and an MBA from Kellogg School of Management. He is originally from Connecticut and currently splits time between Los Angeles and Miami.

  • Interim management, advisory and financial modeling services to a cannabis company to organize and re-build finance and accounting departments, forecast cash flows for retail and cultivation entities, implement financial controls and prepare company for a capital raise.
  • Financial advisory to a cannabis company to implement cash management tools, oversee significant cost improvements, improve working capital and borrowing base management and repair lender relationship through improved forecasting.
  • Interim CFO role as part of CRO team for $500mm+ discount retail chain with international supply chain. Constructed operating model and turnaround plan to spearhead successful 363 sale of 85 stores out of bankruptcy. Led finance department, including cash management, in addition to daily operations across departments and over 5,000 employees to ensure maximum stakeholder recovery.
  • Interim CFO role for $40mm+ women’s fashion company. Oversaw restructuring, lender negotiations and Company-wide cost-cutting efforts to drive Company from significant losses towards profitability. Also led process for PO financing and additional rescue financing to give Company operational runway through a sales process. Implemented forecasting model and improved budgeting and financial controls to repair lender relationship and guide Company and lender through over-advance situation. Helped hire full-time CFO to lead Company upon SCP exit.
  • Advisor to a healthcare services company where executed a successful sale to a financial sponsor. Worked with company management to structure a deal to work around potential overhanging liabilities and identify synergies across potential buyers. Led diligence and valuation efforts ahead of transaction close.
  • Advisor to a retail company in financing and executing a management-led take private transaction. Led diligence and financial modeling efforts.
  • Informal advisor to several start-ups and lenders within cannabis landscape.

Awards

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Ben Smith

Senior Director

Chicago, IL

BiographyNotable AssignmentsMedia & Awards

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Industry Expertise

Ben Smith, a Senior Director out of Chicago at SierraConstellation Partners, has over 20 years of experience providing financial advisory, restructuring and turnaround, and operational improvement services to companies across the transformation spectrum from those significantly distressed, to those stressed in specific segments of finance/operations, to those with targeted performance improvement initiatives.

He has experience with complex restructurings (both in and out of court), operational improvement initiatives, financial planning and analysis, budgeting and forecasting, cash flow management and modeling, business plan development and strategy.

Ben has experience in a variety of industries, including: airlines; automotive; distribution; healthcare; industrial and manufacturing; restaurants; and transportation and logistics.

Prior to joining SCP, Mr. Smith was most recently a Senior Director at Huron leading and supporting turnaround, restructuring and performance improvement engagements for companies of varying sizes in multiple industries.

Mr. Smith holds a bachelor’s degree in Government from Cornell University and earned his MBA from the University of Florida. He is also a Certified Insolvency and Restructuring Advisor (CIRA) and Certified Turnaround Professional (CTP).

  • Served as a financial advisor to a $300 million transportation and logistics company during their multi-year financial and operational restructuring.
  • Served as a financial advisor providing due diligence services for a merger between two regional trucking companies.
  • Served as a financial advisor for a $200 million distributor during its asset divesture and reorganization process.
  • Served as a financial advisor to a $100 million manufacturer during their winddown and eventual sale of remaining assets.
  • Served as financial advisor to several clients in the healthcare industry during their turnaround and restructuring processes.
  • Served as a financial advisor to a producer of storage systems from their pre-bankruptcy planning to their 363 sale.
  • Served as a financial advisor for a CBD producer from their pre-bankruptcy planning through their in-court restructuring.
  • Served as financial advisor to an airline during their bankruptcy process supporting sales of their main line operations, commuter assets and loyalty program.

Awards

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Medmen

SITUATION

  • From its mid-2018 RTO, MedMen was unable to match its unique brand proposition in the cannabis space to operational or financial sustainability. From its 12/28/2019 financials, the Company had an accumulated deficit of over $480 million, an AP balance of over $80 million (resulting in key vendors no longer shipping), minimal liquidity, several near-term secured debt maturities and an annualized EBITDA loss (less inventory add-backs) of approximately $180 million. Without the ability to enter Chapter 11 and without an experienced management team, the Company lacked options.

SCP'S SOLUTION

  • Focus on day-to-day operations and cash flow as Chief Executive Officer, Chief Operating Officer, and later in the case Chief Financial Officer leading to:
    • Rebuilding vendor relationships, fixing store staffing model allocating tax and finance charges appropriately for a Retail EBITDA margin improvement from (8)% to 20%+ (~$40 million impact).
    • $60 million+ in corporate SG&A savings from right-sizing headcount and eliminating excess spend.
    • Eliminated cash burn at cultivation facilities and doubled yield in FL with same footprint (~$40 million impact).
    • Rebuilt relationships and trust with key stakeholders and communities, as well as overhauled corporate governance.

RESULT

  • ~$140 million annualized adjusted EBITDA improvement over six quarters.
  • ~$170 million in total new financing alongside restructuring of primary senior debt facility.
  • The remaining senior debt was eliminated through M&A transactions and working capital issues transformed.
  • Reduction in cash rent impact of $12 million+.
  • Eliminated all existential legal overhang.
  • Revitalized brand and repositioned MedMen for future growth and execution on existing license pipeline.
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Confidential Cannabis Lending Situation

SITUATION

  • Through an acquisition, the lender acquired a significant commercial real estate position with cannabis tenants. Within several months of acquisition, the loan was in default, and SCP was engaged to evaluate the underlying collateral, the true financial position, and a potential exit strategy.

SCP'S SOLUTION

  • SCP established immediate trust with the borrower and discovered it was also in default with the city. Failure to pay taxes within the cure period will remove cannabis-specific zoning, meaning the current tenants would lose their leases and the valuable green overlay would be destroyed. Armed with this information, SCP worked alongside borrower management to extend the cure period and put together a capital raise.

RESULTs

  • SCP demonstrated significant value in uncovering a previously unknown default, and swiftly implemented a plan of action to preserve lender collateral.
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Confidential Cannabis Supply Company

SITUATION

  • The Company had sustained significant operating losses and faced an uncertain fundraising environment given current cannabis valuations and a tentative lender.
  • The Company needed a more constructive lender relationship, more accurate and transparent forecasting, and a clear timeline while pursuing a path to profitability.

SCP'S SOLUTION

  • SCP built a robust 13-week cash flow to give Company management a real-time look into the business and repair the lender relationship.
  • Through this process, SCP highlighted paths for cost-cutting, operational improvement, and improved operational and financial controls.
  • SCP also completed an extensive borrowing base analysis for the lender and Company in order to create a transparent and constructive conversation around the value of the lender’s underlying collateral.

RESULTs

  • The management and finance team adopted changes in processes from SCP’s feedback that allowed better real-time visibility into the cash-burn rate of the business.
  • Further, based on SCP’s direction, tools were constructed that allowed more accurate procurement forecasts and therefore more accurate disbursement forecasts and more streamlined purchasing, improving the lender relationship.
  • The Company shifted to a longer-term partnership with SCP as it continues to benefit from demonstrated expertise in improving controls and operations.
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Confidential Vertically-Integrated Cannabis Company

SITUATION

  • Over the past few years, the Company experienced significant revenue growth, outpacing the capabilities of the existing financing and accounting team. 
  • The Company needed to raise capital for several new ventures without having a clear view of financials or cash flow and missing key financial and operational controls. As such, the Company needed to build out the finance team, get a handle on cash management and look to raise capital.

SCP'S SOLUTION

  • SCP built robust 13-week cash flows at the four main operating entities (a management entity, a retail entity, and two cultivation entities) to give a view into the size of the capital needs and to highlight deficiencies in financial controls and bookkeeping. SCP then assisted Company leadership in building out a finance and accounting team.
  • SCP also oversaw and managed FP&A duties ahead of hiring and training a full-time position and preparing the Company for and overseeing a capital raise.

RESULT

  • The Company requested an extension of SCP’s partnership, and the Company and SCP were able to highlight and execute operational improvements with an accurate view of the business.
  • SCP and the Company hired a controller and three senior accountants, and SCP then hired an FP&A lead while also implementing best practices in finance and accounting and finalizing toward institutional-investor quality financial reporting.
  • Further, SCP’s financial models were used as the base for the beginning stages of their capital raise.