Merger and acquisition (M&A) activity in the cannabis industry is heating up, and market analysts point to several important factors contributing to increased activity.
Profit is always a central issue, and as the founders of companies established years ago seek attractive exit strategies, new players are considering ways to enter the field in a profitable way. The rapid evolution of technology and its increasing application also serve as catalysts for M&A, as larger companies pursue opportunities that are positioned for current or near-term commercial availability. Such expertise and assets developed by smaller brands could potentially turn them into attractive targets for M&A activity.
As Canada prepares to legalize the recreational use of marijuana next summer, the push for M&A becomes even greater. Since the beginning of the fourth quarter of 2016, an average of approximately 3.2 deals have been closing per week well into 2017. In comparison, the average for the same period one year ago was approximately 1.4 deals. Analysts note an increase in interest from Canadian companies that wish to cross the border to become a part of the U.S. cannabis industry.
Related Story: 5 Brilliant Marijuana Business Ideas Killed By Regulations
Generally, M&A activities focus on companies and facilities that already have well-developed positions in the field. In 2017, one of the oldest marijuana dispensaries in Denver sold to a Colorado enterprise. The fate of the two-best selling marijuana retailers in Washington was similar. The initial price tag set for the two businesses was $50 million. Developments on the Canadian market have also been pretty dynamic in 2017. The trend will potentially be upheld in the year to come and strategic interest will fall on innovators in the field of cannabis extraction and CBD oil delivery.