Cannabis operators may certainly grow organically, but more often than not growth happens today as the result of a merger or acquisition. This makes it vital that the value of a going cannabis concern be protected and maximized, and any finding of non-compliance with cannabis rules and regulations can negatively affect a business valuation.

The smart way to assure a problem-free company sale is with a thorough risk-based compliance program. A program that keeps the company’s license in good standing, and helps prevent monetary fines that can seriously affect operations.

In fact, if a company does not have such a compliance program in place, it often will be summarily rejected during the due diligence phase. This is the phase when acquirers tend to focus on regulatory matters, and while an active compliance investigation can generally be managed, the lack of any compliance process whatsoever is always a danger sign.

Developing such a program begins with an assessment of which areas are most important to your operation’s state regulators as well as federal agencies. You can then identify the risks associated with these areas, and take the proper steps to implement controls that will minimize the risks.

Your operation will need a formal risk compliance policy manual that puts these steps down in black and white, so department heads and employees can easily review and implement your risk compliance procedures. This should be a living document that is regularly reviewed and updated to reflect lessons learned, new guidelines issued, and participant feedback.

Most importantly, regulatory agencies favorably view operators that have such policies in place. Should your operation be found in non-compliance of a particular rule, regulators will often take into account whether or not you had a proper compliance program at the time and if so, whether the incident may have been a one-time deviation. Being able to show you have a strong culture of compliance with a program that drives continuous improvement just may save your bacon at a time when you cannot afford a revenue loss.

There’s no question that if it’s your operation being sold in an M&A transaction, you want to sell for top dollar. That’s not going to happen if compliance issues are found during negotiations. But if you have a strong compliance program with a demonstrated record of correcting non-compliance when it’s uncovered, you’ll likely receive the valuation you expect. In addition, you’ll have a faster approval process, with the purchaser more confident in the company’s future performance and eventual return on investment.