Mergers and acquisitions are happening fast in the cannabis industry. In 2018, Forbes predicted there would be an explosion of M&A throughout the medical marijuana industry. It turns out their predictions were right: 2019 has seen the biggest mergers in history within the cannabis sector, and the trend isn’t slowing down.
In order to understand how companies grow through M&A, let’s start with today’s biggest cannabis players.
Cannabis M&A 101: Here’s How Major Players Have Merged and Acquired
If you want to understand how to successfully leverage M&A to grow your own cannabusiness, take some lessons from today’s top players.
Tilray Merges with Its Largest Shareholder
Tilray has completed multiple successful mergers, such as their recent merge with High Park. This merger allowed them to obtain a 662,000 square foot greenhouse facility.
However, Tilray’s most notable merger was their recent merge with Privateer, which allowed Tilray to take back control of their stock prices. Before the merger, Privateer held the majority of Tilray’s stock. Vivien Azer, an analyst with Cowen and Company, told CBC News that the transaction effectively flips the control of a stock sale from Privateer to Tilray and provides Tilray more control. Specifically, the deal allows Tilray to increase its ability to manage the shares within the hands of public investors.
Aurora Buys Up The Competition
“If you can’t beat ’em, join ’em.” That’s exactly what Aurora did during a round of mergers in 2018.
In the past, marijuana producers were smaller, independent companies. As you can imagine, being a smaller company in a growing field of giants has its struggles. Access to capital is a huge barrier to expansion, but so are more complex issues such as the infrastructure required to distribute cannabis in different states and provinces. If a small, independent-type business hopes to expand, they face an uphill battle and often don’t have the team, expertise, and capital required to expand to the level that giants such as Aurora already play at.
Not only did Aurora merge with smaller producers such as H2Biopharma, they also merged with their main competitor, CanniMed.
Canopy Preparing for the Future
Canopy’s biggest merger yet was with the U.S. company Acreage, but the deal going through is contingent on the end of cannabis prohibition in the U.S. Even still, the merger allows Acreage shareholders to rake in about $300 million, with the rest of the money contingent on legalization at the U.S. federal level. This is a bold move by Canopy because it’s a complicated deal with lots of red tape — if the deal is completed, however, it would position Canopy as a global player to be reckoned with.
Interested in growing your own company through M&A?
Wondering where to go from here? Good news! You can acquire what you lack. M&A can help solve a variety of problems faced by growing companies.
Here’s what you can focus on:
1) Keep an eye on top players
It helps to know what’s going on in the big leagues, even if you’re in the little leagues at the moment. Keep an eye on new trends, big mergers, and other top stories. These can help you predict trends in the future, avoid making the same mistakes, and start to learn patterns within the industry.
2) Understand your strengths and weaknesses
Successful M&A is a result of each party leveraging their strengths and weaknesses to create something greater together than what existed when they were apart.
For example, Tilray’s merger with Natura Naturals Holdings allowed Tilray to supply more cannabis products across Canada to a customer list they previously didn’t have access to. Tilray’s ability to widely distribute matched with Natural Naturals Holdings customer list combined to create something bigger than they were before.
Be sure to analyze your strengths and weaknesses in a variety of verticals, such as: technology, talent, infrastructure, geography, product lines, and proprietary information.
3) Think outside the box
As legal adult-use cannabis becomes more widespread, the plant’s uses and applications will grow accordingly. That’s why we’ve seen players like Budweiser enter the market.
It also means successful organizations are always looking to innovate and grow. Just because something isn’t available yet to the public doesn’t mean it’s off the table. If your cannabis company has the ability to do its own unique take on something, use this to your advantage. For example, there’s a strong chance there will be greater demand for food, beverage, and cosmetic cannabis products in the future. What can your company do to stay ahead of the curve?
Before you go, take some advice from Kevin Murphy, CEO of Acreage: “One important investment principle I learned early on: Do what everyone else is not doing and be right.”
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