Cannabis Mergers and Acquisitions


The cannabis industry is rapidly growing, with U.S. legal sales expected to hit $22 billion by 2022. The marketplace witnessed the start of massive merger and acquisition activity in 2018, but then faced a downward trend in 2019 and 2020. Many questioned if a rebound would even be possible. However, major political strides in 2020 and 2021 have brought life back into this budding industry and with the promise of federal legalization on the horizon, consumers aren’t the only ones jumping aboard the cannabis train. 

The cannabis industry has become a hot topic among investors for its potential as a legitimate moneymaker that can provide impressive returns on investment dollars. That’s why many experts predicted that 2021 would be the year to watch and some of the biggest moves are yet to come. We’re keeping our sights on what the rest of this year has in store with even bigger prospects as we get closer to 2022. 

Survival of the Fittest

Mergers and acquisitions in the cannabis industry are really a form of industry evolution – survival of the fittest, so to speak. Why? While cannabis remains illegal on the federal level, companies are forced to find new avenues for growth due to legal limitations, such as the inability for cannabis to cross state lines. This is why the industry is seeing multi-state operators joining forces to expand its operations more efficiently. A prime example of this was when Curaleaf announced the acquisition of Grassroots in July of 2020. In the $875 million deal, Curaleaf was able to bump its state operations from 18 to 23. 

The Forecast for 2021

While federal legalization has been slow at best, it still is within reach of the industry and non-cannabis organizations are taking notice. Up until now, a majority of mergers and acquisitions have been between two cannabis entities. Then Jazz Pharmaceuticals rocked the investment world earlier this year when it announced it would be acquiring GW Pharmaceuticals for a record $7.2 billion. The fact that a non-cannabis company would make such a bold move has gotten the investment world excited and who can blame them? It has started a discussion on a global scale surrounding the legitimacy and longevity of the cannabis industry, something many have been saying from the beginning. 

Why It Matters

The legalized cannabis industry is still relatively new in the grand scheme of things, and it has experienced its fair share of growing pains. Namely, the lingering legal limitations as well as the stigma surrounding those who not only use cannabis but also those who work and stake their livelihood on it. But as support for this industry continues to grow, so does the support of those working in cannabis-related businesses. And as we all know, money talks. 

As these mergers and acquisitions in the cannabis industry continue to find their way into mainstream business conversations, the closer we come to public acceptance. This acceptance represents countless jobs and validation for those who have believed in this industry’s potential from day one. 

How Can Operators Prepare for M&A

While it’s evident that cannabis businesses are often flush with cash – especially given that many aren’t given a fair shot at traditional banking services and operate in cash only – that doesn’t prove it’s ready for a major business deal. When looking for investment opportunities, executives and board members need to see a proven track record of success as well as projections for continued growth. Compliance also plays a major role in determining if a business is ready for a merger or acquisition due to the heavily regulated market. 

Having the right tools in place can make this feat a bit easier. Platforms, like Regrow, can assist business leaders in compiling relevant data and show that your business has put the appropriate workflows in place. This allows companies to maintain compliance and ensure quality at all times. These platforms also have the ability to improve ROI and can be easily integrated into another partner’s systems once a merger or acquisition is complete, while giving full transparency across all their operations. 

As legitimate cannabis-related businesses set their sights on merging with another company and others seek to acquire, investors are sure to keep their eyes locked in the industry and the year’s key players. Access to all company data across the organization in real-time, coupled with the ability to provide accurate reports and providing complete visibility to the entire supply chain will be a big advantage to companies that will be involved with mergers and acquisitions as the industry moves forward in the near future.  

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