M&A in the Cannabis Industry and the Importance of Cannabis Management Software 

The cannabis industry is growing by leaps and bounds. According to Investopedia,  global sales are expected to reach $33.6 billion by 2025. In the US, states are continuing to pass pro-cannabis legislation, with Mississippi becoming the 37th medical cannabis state on February 2, 2022.

As the industry gains momentum, cannabis businesses are taking advantage of the opportunities by expanding into new markets. This expansion in their own state or in other states (becoming multi-state operators or MSOs) is accomplished by applying for a new business license or through mergers and acquisitions (M&A).

Both options have merit, but the M&A route was very popular in 2021. MJBizDaily reports there were 306 M&A transactions through December 2021, with Jazz Pharmaceuticals’ acquisition of GW Pharma for $7.2 billion topping the chart. MJBizDaily believes M&A “could accelerate in 2022—thanks to lower interest costs and pressure on larger companies to expand their footprints and boost revenue.”

Even so, there are a few things to consider when merging with and acquiring existing cannabis operations, not the least of which is recognizing the importance of implementing cannabis business software with multi-entity capabilities.

M&A, Cannabis ERP System Considerations

The popularity of M&A is understandable in light of the benefits, as noted in CannaBusiness ERP’s guide, Cannabis: Guide to Expanding Into New Markets. The benefits include:

  • Insertion into a new market without waiting for new licenses to become available.
  • Acquired company likely has business processes in place for state rules and regulations.
  • Acquired company has existing facilities in place.

Unfortunately, benefits are often accompanied by drawbacks. The guide looks into those, too. “The challenge for MSOs, however, is trying to integrate existing business models into a newly acquired company. Here’s an example: A successful cultivator in California has its eyes set on a company with a license in New York. The California-based company successfully acquires the New York cultivator, and now has to figure out how to integrate its proven business practices and processes into the already-running New York business.”

Further, MSOs will need to meet new state regulations and reporting requirements while simultaneously merging finance and accounting processes. And the time and effort they’ll invest in bringing the people from each business together into a modified and unified culture is yet another factor to consider.

How can MSOs successfully manage these varying tasks? The answer lies with finding the right cannabis business management software (also known as a cannabis ERP solution) with multi-entity capabilities.

The Importance of a Cannabis ERP Solution

Industry-specific software plays a key role in helping businesses in every industry operate optimally and successfully. Cannabis companies are no exception and implementing a Cannabis ERP solution provides them with a single system with the exact features they need to compete in a complex market.

Built to handle finance, operations, seed-to-sale, compliance, quality and traceability needs, cannabis business management software allows MSOs to bring multiple entities under one umbrella. All departments, data and processes connect within the system through company-wide integration, allowing team members to access a single source of truth.

As the guide notes, “With an ERP solution designed for MSOs, multi-company transactions are streamlined and automatically accounted for across multiple entities. This allows users to eliminate the need for duplicate data entry, ensure proper financial traceability and get a consolidated view of transactions across multiple companies (thus making consolidation reporting easier and more efficient).”

Additional benefits include compliance functionality (e.g., maintain audit trails, perform recalls, trace production cycle interactions and more) and product quality and consistency with standardized quality control measures across businesses (e.g., use integrated data to monitor recalls and waste, which helps with meeting regulatory standards).

Selecting the Right Cannabis Business Software

The next year is ripe for growth, especially for cannabis companies that are able to expand into other states. In MJBizDaily’s 10 cannabis industry trends for 2022, the number one trend continued M&A “as capital-flush multistate operators build out their footprints in high-growth marijuana markets.”

MSOs seeking cannabis business management software that can help them manage their multi-state entities should consider CannaBusiness ERP. It’s software that is purpose-built for the cannabis industry. Our specialization in developing solutions for the cannabis cultivation and processing industry has resulted in some of the most respected companies around the world managing their day-to-day operation using CannaBusiness ERP.

Our latest version of our Cannabis ERP solution, CannaBusiness ERP 2022 R1, supplies cultivators, processors and edibles and infused-product manufacturers with new features to support regulatory integrations. For example, we’ve made regulatory functionality more flexible and increased the number of situations the solution can streamline, including package consolidation (allows users to track and consolidate smaller packages into a larger one) and support for micro-licenses. We’ve also enhanced our reporting and usability.

Sterling Stoudenmire IV, President and CEO of Pure Greens, says in the company’s CannaBusiness ERP customer story, “Understanding our inputs, what our costs and our outputs are, what works, what doesn’t—that’s where CannaBusiness ERP becomes a central conduit.”

Grow your business with an ERP solution designed for the cannabis industry. Learn how CannaBusiness ERP, built in Sage X3 and configured by NexTec industry experts, can set your business on the right path. Manage your financials, operations, quality, compliance, traceability, customers, vendors and more.

To learn more about our software and team of industry experts, download our free Cannabis: Guide to Expanding Into New Markets and reach out to us today. We’d love to show you what CannaBusiness ERP can do for your business.

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