When two cannabis giants, Aleafia and Red White & Bloom, bowed out of a potential merger earlier this year, it sent shockwaves throughout the industry. Originally viewed as a match made in corporate heaven, the aborted deal was a surprising turn of events for the cannabis sector. Now, Aleafia and Red White & Bloom have decided to go their separate ways, and this article takes a closer look at what led to the collapse of this merger and its consequences.
1. Aleafia and Red White & Bloom: A Failed Merger
When Aleafia Health Inc. and Red White & Bloom Brands Inc. announced their proposed ‘merger of equals’ on August 4, 2020, it was a deal both companies thought would revolutionise the cannabis industry. There were a number of benefits for the newly merged company, which would have operated under the Red White & Bloom name:
- Leading market access in ‘high opportunity’ American states
- Prospective annual revenue of over CAD $450 million
- A Manufacturing and growing platform capable of scaling up to over 150,000 kilograms
Unfortunately, the vision of a revolutionary cannabis company was short lived. In March 2021, Aleafia and Red White & Bloom announced they had terminated the merger, citing ongoing delays in obtaining the necessary gaming license required to enter the US market as a contributing factor. The mutual goal of becoming a global leader in the cannabis industry through the creation of the biggest Canadian-American cannabis company had fallen by the wayside.
2. The Impacts of the Unsuccessful Joining of Forces
The short-lived attempt of the two forces joining forces yielded dire consequences for both parties involved, dramatically shifting and disrupting their previous modus operandi. As a result, many of its impacts remain apparent today.
- Diminished Military Capabilities: The broken alliance led to a significant weakening of the defense capability of both sides. The first party was rendered vulnerable without the logistical support of the joining force, while the second party lost access to a large arsenal of weapons and defence systems.
- Compromised Strategies: During the operations, both forces had developed a seamless unified strategy to carry out various missions. Unanimous strategy and the need for coordinated action, both forces could manage the situation in a timely and cost-effective manner. After the unimaginable schism, all these plans went awry.
- Financial Loss: The failed partnership cost the two forces millions of resources that had been collected and utilized for the planned projects. Both parties were now left bereft from the resources that had been spent and thus suffered immense losses.
The joining of forces was an attempt to amass military power collectively, but it had devastating effects on both sides. Overall, what had been conceived as a way of bringing stability and security to a region ended up being an area of conflict and a security risk. It caused lasting damage to the forces, and the destabilizing effects are still felt today.
3. Examining the Reasons Behind the Collapsed Deal
Perhaps the most important part of any deal is understanding why it fell through. It’s essential to reflect on this when examining the underlying cause behind the collapsed deal.
When doing so, some key areas to consider include:
- Evaluation of market opportunity: What was the product going to be used for? Was there enough potential demand for it to be commercially viable?
- Negotiation dynamics: How did the negotiations between both parties transpire? Were there competing interests at play?
- Business relationships: Were the individuals involved in the deal aware of the objectives of each party, and was there enough trust between them?
Ultimately, breaking down the reasons behind a failed deal can inspire greater success going forward. Many solutions may present themselves after analysing the root causes, enabling the parties involved to successfully refocus their efforts.
4. Alternatives to a Failed Merger: What Now?
If your merger plans have hit a dead end, it may be time to explore other options. Finding a solution to an impasse can be difficult, but there are some promising paths worth considering.
One possible course is to negotiate a different deal. Shifting the terms of the agreement may be just the change needed to move it forward. It could be reassessing the price, timeline or even conditions for the merger. In many cases, a compromise could be beneficial to both parties.
If the merger is no longer on the table, other ideas should be pursued instead. Here are a few alternatives to a failed merger:
- Joint venture: Two companies can come together to create a joint venture on a smaller scale.
- Partnership: Working together, each company can keep its independence while achieving mutual objectives.
- Acquisition: Not only can one company purchase another, but they could also share resources and personnel.
- Divestment: Disbanding the connection could be a sensible option for both firms.
No matter the outcome, it’s important to explore all the available options. The right choice in the end could be the key to success.
The days of Aleafia and Red White & Bloom exploring a formal merger are now firmly behind us, but the stories of these two innovative cannabis companies will surely be remembered. Who knows where the future of cannabis will take these two industry titans? We will have to wait and see.