Weed Industry Readies for M&A After COVID-19 Spikes Demand
The prospect of US legalization is luring investors to the industry.
After a whole year of almost no deals in the sector, profitable cannabis producers are now looking to expand their brands into niche segments.
Canopy Growth, one of the largest cannabis companies on the planet, has both the means and the opportunity to grab an even bigger slice of the market. The company’s shares jumped a whopping 13% recently, while its net revenue for this quarter — ending on June 30 — was CA$110.4 million (around US$82.47 million); an increase of 2.3% from the previous quarter.
Aphria Inc., another huge Canadian pot producer, is also interested in M&A activity, provided that their deal with a popular consumer brand goes through, CEO Irwin Simon told Reuters.
It’s not just the big players who want to expand. Smaller companies also want a piece of the market, while experts believe that “Big Food” and “Big Agra” might also be tempted into developing their own brands and getting in on the action.
The majority of these plans, though, hinge on US legalization. Analysts expect that a Democratic win in November would immediately allow US multi-state companies to expand operations.
Mergers and acquisitions in the cannabis industry recently came to a halt. Harvest Health & Recreation called off what was supposed to be the biggest transaction in the industry — an $850 million deal with Verano Holdings. There were other cancellations at the end of 2019 too, including MadMen’s purchase of PharmaCann and Cresco Labs’s acquisition of VidaCann.
The legalization of cannabis in the States isn’t the only thing spurring mergers and acquisitions. Increasing demand for cannabis amid the coronavirus crisis and a rise in stocks could also attract buyers to this budding sector.