We are almost halfway through 2017 and the year has been a year to remember (or forget) for many companies.
From Germany introducing legal medical marijuana legislation to Canada introducing a plan to legalize recreational marijuana, new opportunities continue to emerge.
One of the major differences between the cannabis sector today and this time last year is the strength of the companies from a capital standpoint. More than $1 billion has been raised over the last year and much of this has been done by Canadian cannabis firms.
The improved capital position has allowed companies to take advantage of these new opportunities and we want to highlight five of the most significant deals to be announced or closed so far this year.
- In January, Canopy Growth Corporation (WEED.TO) (TWMJF) completed its acquisition of Mettrum Health, a licensed medical marijuana producer in Canada. The combination of the two businesses created a globally diversified cannabis company that has six licensed facilities and a licensed production footprint of approximately 665,000 sq. ft. with significant acreage for expansion. The combined company will bring together Mettrum’s simple and proven Mettrum Spectrum brand with the medically-focused brand of Bedrocan Canada and the lifestyle-focused brand of Tweed. After the acquisition was completed, Health Canada reported the use of illegal pesticides by Mettrum and we will be monitoring what issues this creates for Canopy Growth going forward.
- In May, Aurora Cannabis significantly increased its market share in Germany after acquiring Pedanios GmbH. Since December 2015, the company has been importing, exporting, and distributing medical cannabis into and within the European Union (EU). Pedanios holds all relevant licenses and permits and is a federally licensed medical and narcotic wholesale and GMP inspected narcotic import business. Over the last few years, Pedanios has become a leading wholesale importer, exporter, and distributor of medical cannabis in the EU. In March, Aurora entered the Australian medical marijuana market by acquiring 19.9% of Cann Group ahead of its initial public offering.
- Earlier this month, High Times was acquired by a group of investors that includes Damian Marley, the son of the reggae icon Bob Marley. The investor group also included Adam Levin, the founder of the investment firm Oreva Capital and it acquired a controlling interest of the magazine at a $70 million valuation. Although this transaction is very different from the other two, it shows that the size of the deals as well as company valuations have increased significantly and are also attracting new investors.
Expect to See More M&A Activity
While the recent activity is exciting, it is just getting started and we expect to see the pace of size of acquisitions in the cannabis industry to continue to increase. The market has already seen several large acquisitions completed in Canada and we expect this trend to pick up in the United States once marijuana is legalized.
Until the United States reforms its policies, we expect to see a good portion of the M&A activity occur outside the U.S. and in countries like Germany and Australia. The cannabis industry is not even in the first inning of multi-decade growth cycle and we expect this trend to accelerate significantly over the next few years.