MJBizMag November-December 2021 - 84

BestPracticesInRetail | Solomon Israel
Legal Considerations for
Selling a Retail Business
Griffen Thorne is a
Los Angeles-based
attorney with the law
firm Harris Bricken.
He has experience
representing both
buyers and sellers
in cannabis M&A
transactions, including
retail acquisitions.
Retail chain Friendly Stranger Holdings in Ontario, Canada, was acquired by Fire
& Flower, a larger national chain. Courtesy Photo
by Toronto-based cannabis
consumer packaged goods
company Slang Worldwide
closed in August.
" That's where a publicly
traded company like Slang
(is) great. They have that
experience, they can go out
into the marketplace, and they
can raise that money, " Lynn
said.
He also felt a responsibility
to High Fidelity's early
investors.
Shayne Lynn
" I had shareholders that were really patient, but there did
come a time-probably during the pandemic-(when) it was like,
'Wow, I've had these people's money for a long time.' "
Building an Acquisition-friendly Business
In Ontario, Canada, multistore operator Friendly Stranger Holdings
was built for sustainability, said former President James Jesty,
who helped shepherd the company through its acquisition by
cannabis retailer Fire & Flower in late 2020.
Jesty said his philosophy was focusing on " creating a great
guest experience " and building a successful business.
" If it gets acquired, great; somebody's going to see the value
in that. Fire & Flower saw the value in the business we had built
and (in) our customer base, " he said.
84 MJBizMagazine | November-December 2021
Legal fees for an
acquisition deal
generally run into the
tens of thousands
of dollars, Thorne
advised, with the cost increasing for more
complicated deals. Lawyers in major urban areas
will generally cost more, he added.
Sellers are free to forgo a lawyer, but Thorne
recommended enlisting a cannabis-specific
attorney who's familiar with local regulations.
" The buyer's going to have a lawyer, " he said.
Griffen Thorne
" They're going to put together a purchase
agreement and send it to the seller. And if the seller
doesn't know what they're reading-or doesn't know
some of the finer points or dynamics in an M&A
deal-they're going to miss out on opportunities to
negotiate. "
LOOKING UNDER THE HOOD
Thorne compared buying a cannabis business to
buying a used car: The buyer will want to look under
the hood for any signs of trouble. Sellers should be
prepared to respond to due-diligence questions
and disclose financial records or risk the buyer
walking away.
If your store has problems-unpaid taxes or
pending lawsuits, for example-Thorne said it's in
your best interest to disclose them upfront.
" You might have to accept a haircut on the purchase
price or some other part of the deal, but that's
much better than spending three years in court and
getting hit with a punitive-damages award. "
Thorne advised against rushing a deal, especially
if it's being done to hide something. But overnegotiating
brings its own problems, he said, by
drawing out the process and adding to the cost of
legal fees.
" At the beginning of a negotiation, sure, just shoot
for the moon, " Thorne said.
" But after a while, one side will end up putting (a
contentious) clause in, the other side takes it out,
the other side puts it back in. ... There's only so long
people are going to want to deal with that " before
scrapping the deal entirely.
- Solomon Israel
MJBizMag November-December 2021

Table of Contents for the Digital Edition of MJBizMag November-December 2021
