Mergers and Acquisitions in the Cannabis Industry

Mergers and acquisitions have been happening at a frenetic pace in the last couple of years in the cannabis industry. Companies seek to consolidate, create synergy, capitalize on market opportunities and work around the myriad regulations through the processes of mergers and acquisitions. We have already witnessed a few large scale mergers and acquisitions. M&As primarily help to penetrate new markets, increase product variety and range of offerings, vertically integrate along the supply chain and leverage new technologies and learning in this burgeoning fledgling industry thus creating global companies. Traditional alcohol, tobacco, wellness, retail, pharmaceutical, food and beverage companies are looking to use mergers and acquisitions to enter the newly profitable cannabis industry. Some companies are using acquisitions to corner a larger share of licenses and permits in areas where they are limited. In Canada, national banks are supporting M&As in the legal recreational cannabis market. Overall it is a time of rapid changes and consolidation as entities with resources look to corner market share and small players look to sell and exit with a good profit.

Related articles

The following set of articles related to the subject are taken from various media. Words in italics are the thoughts of yours truly at the time of reading the article. 

'The overall displacement or cannibalization of tobacco by cannabis products in California alone amounted to $84.5 million overall from 2017-2018 (not including 2017 e-cigarettes, figures for which were not available). The shifts amounted to $33.8 million for cigarettes, $8.3 million for non-cigarette tobacco, and $42.6 million for e-cigarettes (in 2018 only).

Across the U.S. overall, the 2018 spending shifts amounted to $4.3 billion for alcohol: (1.54% of that market), $1.3 billion for pharmaceuticals (1.10%), and $219 million (0.22%) for tobacco.'
https://newfrontierdata.com/marijuana-insights/altria-pmi-merger-confirms-longtime-predictions-marks-industry-progression/

'Europe’s international hemp market continues to heat up. Today, ICC International Cannabis Corp. announced that it has acquired Polannabis Holdings. Through its subsidiary company, Polannabis possess a Polish hemp processing and extraction license which permits the company to produce hemp-derived CBD products.'
https://www.hempbizjournal.com/icc-acquires-polannabis/


'Royal Bank of Canada’s investment-banking division will advise on stock sales and arranging takeovers for companies in the marijuana industry, joining Bank of Montreal’s BMO Capital Markets and smaller independent firms such as Canaccord Genuity Group Inc. in serving an industry that didn’t exist five years ago. RBC also started research coverage of the cannabis industry this month, with Doug Miehm as the main analyst covering the sector out of Toronto.'
https://www.bloomberg.com/news/articles/2018-12-18/rbc-capital-markets-will-start-doing-deals-for-pot-companies


'The fragmented, state-by-state nature of the marijuana industry historically has been dominated by small, local players, but larger, publicly traded companies with multistate operations are becoming an increasingly prevalent force.

Rapid consolidation and expansion among cannabis companies dominated 2018 with more than 300 mergers and acquisitions and a rash of reverse takeovers that allowed U.S. companies to go public in Canada, where marijuana is federally legal.'
https://mjbizdaily.com/chart-multistate-cannabis-operators-rapidly-expanding-new-markets/


'In a deal establishing a new industry landmark by which one of Canada’s largest licensed producers is buying the largest hemp company in a deal worth as much as $419 million CAD ($319 million USD), Toronto-based Tilray looks to be muscling past its closest competitors — Aurora Cannabis ACB and Canopy Growth CGC — within the rapidly expanding U.S. CBD market.

It also offers affirmation that 2019 looks to be a big year for industry mergers, acquisitions and expansion as large tobacco, pharmaceutical, food, and beverage companies look to enter the legal cannabis and hemp marketplaces.'
https://newfrontierdata.com/marijuana-insights/tilray-acquisition-of-manitoba-harvest-sets-early-pace-for-2019-as-year-of-consolidation/


'The deal surpasses the previous record for a U.S. acquisition in the cannabis industry – MedMen’s $682 million all-stock purchase of PharmaCann in October.

Both acquisitions are a sign that M&A activity will remain brisk in the cannabis industry, with more blockbuster deals down the road.

Upon closing, the all-stock deal with Verano will give Harvest one of the largest footprints among multistate cannabis operators with 123 dispensaries in 16 states.'
https://mjbizdaily.com/harvest-health-850-million-acquisition-multistate-operator-verano/


'If you're wondering why Harvest Health & Recreation decided to pony up $850 million for Verano, look no further than opportunity cost. It can take an exceptionally long time to get approval for cultivation and processing licenses, as well as retail sales permits. In some states, issuance of cultivation licenses and retail permits is capped or severely limited. Acquiring an established company with licenses in hand (or being reviewed) reduces the time and cost it'll take to build up Harvest Health's brand.'
https://420intel.com/articles/2019/03/15/largest-us-marijuana-deal-history-was-just-announced


'Over the last year, cannabis companies have been busy joining forces ahead of July 1, the approximate date by which most Canadian provinces will have in place laws governing the substance. With summer looming on the horizon, some large law firms are advising cannabis industry clients on a flurry of deals designed to capture market share.'
https://www.fool.com/investing/2018/02/07/the-5-biggest-marijuana-acquisitions-of-all-time.aspx


'MedMen Enterprises has agreed to acquire multistate medical marijuana company PharmaCann in an all-stock deal valued at $682 million, inking what is believed to be the largest acquisition to date in the U.S. cannabis industry.'
https://mjbizdaily.com/medmen-inks-blockbuster-682-million-stock-deal-to-acquire-medical-cannabis-firm-pharmacann/


'Los Angeles-based MedMen Enterprises is expanding into Arizona’s large medical marijuana market after striking a deal with WhiteStar Solutions to acquire Monarch, a vertically integrated MMJ business with operations in Scottsdale and Mesa.'
https://mjbizdaily.com/medmen-acquires-vertically-integrated-arizona-medical-marijuana-company/


'The flurry of M&A activity, which is on pace to double in the marijuana industry this year, is giving more company founders a chance to cash out at an attractive price after years of working 24/7 to build their businesses.'
https://mjbizdaily.com/thinking-about-cashing-out-of-your-cannabis-business-here-are-some-things-to-consider/


'California-based cannabis culture publication High Times has acquired Dope Media, the Seattle-based publisher of Dope Magazine, for $11.2 million in cash and stock. The deal adds to the High Times portfolio of cannabis publications, which includes the online news website Green Rush Daily and Culture Magazine.'
https://mjbizdaily.com/cannabis-publication-high-times-buys-dope-magazine-for-11-2-million/