M&A
What Buyers Actually Diligence
The five financial red flags that quietly discount your multiple, and how to clear them first.
Diligence is a reading test
When a strategic buyer or fund looks at a cannabis operator, they are not hunting for a single flaw. They are asking whether the numbers can be trusted at all. A clean multiple comes from books that answer questions before they are asked.
The five things that quietly discount you
- Loose 280E positions. An allocation nobody can explain reads as risk, and risk is priced in.
- Cash controls. A cash-heavy business with thin reconciliation invites a haircut on every reported dollar.
- Related-party fog. Management fees and intercompany rent that are not at arm’s length distort the earnings a buyer is paying for.
- Inventory that will not tie out. If seed-to-sale and the ledger disagree, so does the valuation.
- License continuity. Anything that clouds the transfer of the license clouds the deal.
Fix the reading, raise the number
None of these require a different business. They require a quarter or two of tightening before the room opens. The operators who diligence themselves first are the ones who set the terms.
