The Role of M&A in the Cannabis Industry

Mergers and acquisitions (M&A) are a staple in the cannabis investment market. Some of the deals investors have seen in the past have completely upended the status quo for this market.

In 2021, business transactions may gain a new sense of importance for the cannabis space as the industry finds itself at a critical time, with US options attracting attention.

The Investing News Network (INN) talked with experts and companies across the board to find out more about the significance of M&A in 2021 for this developing sector.

How do Canada and the US relate through M&A?

Canadian cannabis operations have gone through significant ups and downs. As it stands, it appears the domestic market for Canadians is starting to show a critical evolution in strategy.

Simultaneously, the US is calling, and investors are awaiting the potential that could arrive as Canadians flex their expertise in the US marketplace. But that will be no easy task — pending policy decisions will be critical for the Canadians to even get a chance at the US marketplace.

INN looked into the state of affairs for the US market as it relates to the intentions of Canadian operators. Moving forward, M&A may come into the picture as Canadians explore any avenue possible to expand their operations below the border.

All eyes on American operators

INN also took a closer look at the interests of US multi-state operators (MSOs) when it comes to M&A. Thanks to the fractured nature of the state-by-state cannabis market in the US, the demands and appetite for these players are very different from the rest of the cannabis space.

Generally speaking, investors need to be ready for uncertainty when it comes to US plays, given that there is wild speculation as to when cannabis policy of any kind will be approved in Washington.

Experts told INN that in preparation for meaningful policy changes the US, MSOs are pursuing different tactics to get ready for potential new information.

What is the value of pursuits outside of North America?

From the perspective of Canadian cannabis players, the landscape for international ventures has greatly shifted from the days when massive expansion plans and growth were in favor.

Now with a more measured approach, the market is evaluating international opportunities in a different way. At the same time, internationally focused companies have risen to the occasion and have begun offering investors exposure to international portfolios based on future cannabis growth.

Canadian expert tells us factors playing into M&A operations

Monica Chadha, national cannabis leader for EY Canada, talked to INN in a video interview to break down the intricacies of how M&A is accomplished in the cannabis space.

The team at EY Canada supports the cannabis industry through various consultancy efforts, and has a firsthand sense for the appetite seen in the sector.

“I think the flavor of the year, and maybe next year, will be consolidation, and I think companies that are not fortunate enough to raise or strategically deploy capital will likely see more closures,” Chadha said.

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Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.