For several years, we have highlighted an increasing amount of merger and acquisition (M&A) activity in the cannabis sector.
So far this year, consolidation has been a much more important investment theme in the cannabis industry and we have seen a substantial spike in the amount (as well as the size) of M&A transactions.
When compared to prior years, there has been a change in the type of M&A transactions that have been announced and believe that our readers need to be aware of the new strategy. One of the most significant changes that is related to the theme pertains to how companies have taken a more strategic and bolt-on approach to the due diligence process.
We believe the shift in the M&A trend has been impacted by changes to the management teams at several leading cannabis operators in Canada and the US. The cannabis sector has been attracting executives from highly regulated industries (i.e. alcohol, pharmaceutical, and tobacco). Many of the new executives have experience working with consumer packaged goods (CPG) companies and we are favorable on the improvement in type of human capital that is entering the sector.
Today, we have highlighted 3 trend changes in regards to M&A transactions in the cannabis sector that our readers should be aware of.
Acquiring assets that are strategic and complementary in nature
- From leading cannabis brands to international markets, companies that have been acquisition targets have leverage to high-growth verticals and are complementary to the company that is making the acquisition.
The price range of acquisitions have widened
- Another major trend in the cannabis M&A market is related to the pricing of transactions. So far this year, the range has been much wider and we have seen transactions valued at less than $20 million to almost $1 billion.
The cannabis markets the acquisitions are levered to has changed
- A few years ago, we noticed a substantial increase in the amount of acquisitions of companies that had leverage to markets in Latin America, Europe, and Africa. So far this year, we have noticed a shift in the location of the assets being acquired. Many of the acquisitions that have been reported are levered to the US market and this is a shift that we are bullish on.
If you are interested in learning more about the consolidation trend in the cannabis industry, please send an email to email@example.com with the subject “Cannabis Consolidation” to be added to our distribution list.
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