As the number of states legalizing cannabis for medical and recreational use increases, businesses involved in the legal cultivation, processing, and distribution of cannabis, as well as those providing ancillary services, face an array of business issues, including: accounting, acquisition disputes, anti-money laundering, banking, branding, IP, cybersecurity, taxation advisory, regulatory compliance, and valuation.
FTI Consulting understands these complex business issues. Having been active in different sectors of the multi-faceted legal cannabis industry, we are uniquely qualified to help clients achieve their business goals in this rapidly growing industry.
FTI Consulting offers a variety of solutions and services to the cannabis industry to bolster profitability, enhance reputation, maintain brand integrity, and ensure regulatory compliance. We understand the unique challenges of the cannabis industry in both the United States and Canada.
Reputational & Financial Due Diligence
The FTI Consulting Global Risk & Investigations Practice provides detailed background information – on growers, processors, potential investors, payment processors, and vendors – that goes well beyond a simple check of criminal records. We provide a complete profile of persons and companies that are crucial to your business success, including:
- Financial Stability
- Pending Litigation
- Identify Fraud Indicators
- Identify Questionable Business Associates
- Uncover Adverse Media & Social Media Information
Our certified anti-money laundering (AML) specialists can help design an AML compliance program that meets the requirements of state regulators, financial institutions, and investors.
- Ensure clients meet FinCEN standards and abide by FinCEN and Cole Memo standards.
- Independent reviews to craft new or bolster existing AML compliance programs for financial institutions including MSBs, payment processors, and insurance companies.
- End-to-end anti-money laundering, sanctions, and anti-corruption consulting services.
- A history of success on matters ranging from complex global investigations to discreet remediation tasks.
- Experience liaising on our clients’ behalves with regulatory authorities on AML issues.
Accounting Operations & Readiness
The shifting nature of the industry’s regulations can make financial reporting compliance a challenge. Our established group of FTI Consulting professionals includes former audit firm CPAs, industry Controllers, CFOs, and regulators with extensive experience resolving accounting operations, financial reporting, and auditing challenges for clients with unusual business needs.
As companies in the cannabis industry grow, they will require a sound and reliable financial reporting infrastructure. The FTI Consulting Financial Accounting Advisory Team has experience with both early-stage and middle-market companies. Our deep technical accounting expertise, combined with knowledge of financial operations, technology, and data management, helps companies prepare for future growth, acquisitions, or public offerings.
Drug Enforcement Agency (DEA) Compliance
FTI Consulting has partnered with former DEA investigators to provide a full suite of cannabis compliance and security solutions to support the cannabis industry. Properly implemented programs mitigate risk and avert the need for law enforcement scrutiny. The same ex-DEA partners who have been providing regulatory compliance and oversight to the U.S. pharmaceutical industry regarding controlled substances are now assisting operations in the cannabis industry to meet DEA compliance standards.
We assist in meeting and exceeding regulatory mandates established by federal, state, and local agencies. Our offerings include DEA (CSA/CFR) “seed to sale” programs, pre-license compliance inspections, risk assessments, diversion detection and prevention, and cash handling protection and transportation programs.
The FTI Consulting Global Intellectual Property (IP) team advises clients on the value and economic benefits of developing a strong intellectual property plan. Our IP professionals are recognized globally for their expertise and have extensive consulting experience in emerging and complex industries, including recycling, solar power, and biotechnology.
Successful cannabis-related businesses must create smart, flexible, and knowledgeable IP strategies to compete and protect themselves as the market expands and matures. Over 500 patents have already been issued within the cannabis field including plant patents, patents for consumption devices, agricultural related technology (e.g., greenhouses), and biotechnology (e.g., R&D related to new drugs). Trademarks and trade secrets need protection to effectively operate and maintain competitive advantage.
Since 2014, FTI Consulting has been helping cannabis companies improve their commercial influence – the ability to operate their businesses with informed credibility and the confidence of their stakeholders. Our Strategic Communications professionals help clients improve public perception by leveraging national and business media, positioning companies as polished and professional in a sea of more amateur competitors.
Our years of experience assisting companies in the cannabis industry helps address a wide range of business challenges:
- Community resistance to dispensaries
- Rigorous state and local approval processes
- Tight deadlines for grand openings
- Crisis planning for unexpected challenges
Acquisitions & Restructuring
The cannabis industry is changing rapidly, with new providers and new investors entering the market every day. FTI Consulting has the resources to help cannabis related companies navigate the business challenges and opportunities that come with rapid growth.
- We have proven experience helping cannabis companies navigate the purchase or sale of a business or to prepare for a public offering.
- Our international presence and experience can make expanding into new markets easier and our post-acquisition dispute assistance is available if something goes wrong.
- Also, we have helped non-cannabis companies carve-out their cannabis related business lines to provide an extra layer of protection from the ever-shifting industry regulations.
The act of valuing a business is to ultimately understand and price risk. The value of an asset is equal to the risk adjusted present value of future economic benefits.
In theory, valuing a cannabis business – whether it be a retail operation, a grower, medical dispensary, or ancillary business – is no different than valuing any other type of business. However, there are idiosyncratic risks and nuances in the cannabis industry that make valuation uniquely challenging:
- Quickly evolving and stratified regulatory structure
- A deficit of reliable market driven data
- Taxation complexities
- Difficult to properly analyze internal controls and long-term leases
- Rapid growth
- Other idiosyncratic industry characteristics
The cannabis industry faces unique challenges – both in terms of the business risks they face and the complications in acquiring insurance coverage. Whether your business is on the plant side (grower, distributor, or seller) or on the financial side of the industry, our team of professionals will help you develop a strong risk management portfolio to protect what you do – your business, product and employees.
FTI Consulting Insurance professionals have the experience needed to provide business-critical guidance:
- Former Insurance company CEO, CFO & General Counsel
- Former Superintendent of the New York State Insurance Department
- Former Chief Actuary of a reinsurance company
- Former ‘Big 4’ global insurance practice leader
Buying Cannabis Businesses Insurance
The cannabis insurance marketplace is far from mature. FTI Consulting can help find the best coverage to address your unique risks, whether you’re on the plant side or the financial side of the cannabis industry.
Insurance Companies Seeking to Enter the Cannabis Industry Market
We work with MGA’s and brokers, carriers, and reinsurers – all trying to find their place in the rapidly evolving cannabis industry. We assist with set-up, including addressing the organizational structure, regulations, governance and compliance to be able to offer insurance products. We can help with any follow-on audit work required.
The transaction tax services team develops strategic solutions to clients’ unique tax issues arising from the cannabis industry. With more than 125 tax professionals in New York, London, and throughout the world, FTI Consulting offers our clients a broad range of experience – garnered from their experience in law firms, Big 4 accounting firms, government, and corporate, in-house tax departments – including:
- Advising startups on initial structure to acquisitions
- Help clients minimize taxes and maximize economic returns
- Addressing both federal tax issues and the broadly varying state and local tax regimes
The FTI Consulting Cybersecurity Practice provides a full range of internal and external risk assessments to evaluate your systems, applications and processes for a variety of vulnerabilities, including customer and patient data.
- Design and implementation of a custom-tailored cybersecurity resilience plan that is unique to your company’s environment and challenges.
- Incident preparedness
- Threat hunting operations
- Incident response
The possibility of litigation exists for any business. Although U.S. cannabis businesses are still generally young, they have employees, suppliers, and customers, and each of these relationships is susceptible to disagreements and disputes. In the cannabis industry, litigation can also be brought by authorities, in some states, who choose to bring civil actions as a means of enforcement.
Our dispute advisory professionals have vast experience in every type of dispute – including labor & employment, contracts, intellectual property, and more. FTI’s experts have a proven track record of success in cannabis related proceedings, whether you’re facing a trial, arbitration, or regulatory civil action.
Disclaimer: Possessing, using, distributing, and/or selling marijuana or marijuana-based products is illegal under federal law, regardless of any state law that may decriminalize such activity under certain circumstances. Although federal enforcement policy may at times defer to states’ laws and not enforce conflicting federal laws, interested businesses and individuals should be aware that compliance with state law in no way assures compliance with federal law, and there is a risk that conflicting federal laws may be enforced in the future. No advice we give is intended to provide any guidance or assistance in violating federal law.
January 28, 2021
Forensic & Litigation Consulting
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Lincoln W. Eckhardt
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