Finalizing financials with management to go to market, $3.5M - $4.5M in EBITDA
California Cultivation Center Acquisition Opportunity
Owner has to relocate after spending last ~10 years building state of the art facility. SMB PE will be advising the seller as M&A advisor.
Expected to come to market over next 1-2 weeks.
EXECUTIVE SUMMARY
- What is it? An institutional-grade commercial cannabis cultivation center is being quietly offered for sale. Serious inquiries only.
- Financials? The business generates over $4M in EBITDA annually and last year alone distributed over $2M in cash to stakeholders and investors.
- Why Sale? Relocation. After nearly a decade of work building out and establishing a state of the art facility and proper permits, the seller is relocating for family reasons and is interested in exploring a sale in market after a long run. The Seller has already sold 2x businesses, and this is his pride and joy but given the relocation he is letting us test the market for buyers.
NEXT STEPS
WHY THIS DEAL?
- Over $3.5M - $4.5M in Annual EBITDA: As mentioned above, $3.5M - $4.5M of EBITDA and $2M of that in cash dividends out with the business operating as is. Sizeable cashflow on the business for an interested Business Buyer or Strategic Bidder.
- Performing In Down Market For Cannabis: The price per pound of cannabis since this project was started nearly a decade ago, has gone down more than 50%
- Despite the struggles of others in the industry, our facility has clean books and strong financials amongst a sea of failures
- Now fully licensed, built and matured it is generating EBITDA at healthy 30% - 40% margins
- Potential For Federal Legalization (Estimated Impact +$1M in EBITDA): Donald Trump and federal officials are reviewing the potential to legalize Marijuana at the federal level.
- The annual estimated impact on the business is estimated to bring an additional $1M of EBITDA efficiencies to the business (leaving out for now - but for context).
- Additionally, with legalization banking in the system would be allowed and valuations and prices would change materially if more capital was allowed to flow into the space
- The thinking is given the challenges in the economy and approval ratings it may force a decision given there are little tools to fight a bad economy
- Either way - with legalization the value of the business in five years is expected to increase as federalization is rolled out
- Normalized Commodity Prices: If the price per pound of cannabis remains the same, you will generate cashflow.
- Upside: If prices return even slightly - there are major value implications for the business. Could be more than double current rate as they were originally projecting the business with the price of cannabis at 2.5x of what it currently is.
- Price Recovery: Prices may never recover, but if they do slightly there is major upside there for the buyer in 3-5 years if things go their way.
- Healthy Margins Despite Headwinds: Despite the price of cannabis contracting significantly, management still ran the business highly profitable with 30% - 40% margins.
- Operations & Systems: We have spent a lot of time on the phone with the seller, strong operator and systems based CEO
- Whoever buys this business will get a full set of standard operating procedures SOPs and a ton of knowledge that has gotten this team through a major down period in their industry. They have a different approach that has proven it works.
- Great Team: They have a good team in place, with managers in the field and in the financial areas of the business. The team has interest in staying on and does a great job. Spent a lot of time on hiring.