Mergers and Acquisitions Intensify Within the Burgeoning Cannabis Industry

FinancialBuzz.com News Commentary

NEW YORK, April 22, 2019 /PRNewswire/ -- Most U.S. cannabis companies are generally small, privately-owned businesses because federal regulations limit their expansion. A few of these limitations even restrict companies from transporting cannabis over state lines, however, some companies have expanded outwards and have begun launching operations in multiple states. While regulations hinder the growth of the industry, the exponential growth the cannabis market so far has exhibited the fact that it is catching the attention of investors, analysts, and even other industries. A handful are looking to integrate cannabis into their business models, while others are just holding a stake within the industry. Moreover, larger cannabis players have begun to buyout other smaller companies within the marketspace, as they are looking to either expand established operations within a region or expand to a new area. In particular, mergers and acquisitions (M&A) are expected to be a large part of a pivotal transition period for the cannabis industry. As M&A begin to ramp up, larger players will see their financials grow, thus accelerating the overall cannabis industry even further. According to data compiled by Mordor Intelligence, the global cannabis market was valued at USD 7.7 Billion in 2016. By 2023, the market is expected to reach USD 65 Billion, registering a CAGR of 37%. Cleanspark, Inc. (OTC: CLSK), Canopy Growth Corporation (NYSE: CGC) (TSX: WEED), Innovative Industrial Properties, Inc. (NYSE: IIPR), Charlottes Web Holdings Inc. (OTC: CWBHF) (CSE: CWEB), CannTrust Holdings Inc. (NYSE: CTST) (TSX: TRST)

Now, pharmaceutical, tobacco, and beverage sectors have all taken interest in the cannabis market. For instance, beverage and tobacco producers are looking to manufacture and commercialize cannabis-infused products for both medical and recreational applications. On the other hand, pharmaceutical companies are looking to leverage cannabis for its therapeutic medical benefits, since many medical institutions believe that cannabis can be an alternative to commonly used traditional drugs such as opioids. PricewaterhouseCoopers said that these companies are seeking economies of scale, expanding their patient base, securing consumer-centric products and brands, entering new markets or acquiring protected distribution channels. "All deals start with strategy. It's critical that the deal strategy aligns with all other levels of a business' strategy—corporate, growth and M&A—to reinforce the overall corporate direction. This allows companies to better source and approach M&A targets to achieve their growth objectives," said PricewaterhouseCoopers, "Planning for successful integration of a target is critical to realize shareholder value. While the task may seem daunting, approaching it in a methodical manner supported by the right people and systems can make it much easier. Ultimately, the rewards for a successful integration can far exceed the costs and risks of deal-making."