Cannabis Industry Booms As Analysts Predict Merger and Acquisition Activity to Reach $2B in 2021
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Cannabis Industry Booms As Analysts Predict Merger and Acquisition Activity to Reach $2B in 2021

The cannabis industry continues to thrive!

According to PR Newswire, the cannabis market ended 2020 with more than $600 million in deals.

The success is expected to continue with an anticipated backlog of $2 billion in deals as 2021 continues. Factors like COVID-19 and election results that opened up five new states to legalize cannabis use and possible federal regulatory reform continue to boost prospects.

Per the Cannabis Industry Journal, analysts predict that the U.S. cannabis market is positioned to double by 2025.

“Growth is expected to be led by multi-state operators who have achieved scale, cleaned up their balance sheets, and stockpiled dry powder for roll-up acquisitions,” reads the article on the website. “Cannabis companies raised nearly $134 million in the two weeks before Election Day, a 185% increase over the same period last year. Most of the money flowed to multistate operators. In addition, the biggest stocks by market capitalization saw a roughly 20% bump ahead of the election and now are trading at record volumes, providing plenty of stock currency for further acquisitions”

Companies that are active today in the cannabis-related markets include Greenrose Acquisition Corp., Green Thumb Industries Inc., Sundial Growers Inc., Item 9 Labs Corp., and Curaleaf Holdings, Inc.

“In light of the maturing industry and the 2019 bust, the valuation model for acquisitions in the cannabis space is evolving from one based on sales, typically associated with emerging growth industries, to a more mature industry model based on profits or Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA),” continued Cannabis Industry Journal. “Most cannabis MSOs have stabilized and generate positive EBITDA, which justifies the evolution away from a sales-driven model.  The cannabis M&A market is moving into a more mature phase, as MSOs will be choosier in their approach rather than continuing the land-grab mentality of years past. Due to improved financial strength, 2021 should see these MSOs continuing to expand their footprints either within existing states or new ones. Although uncertainties abound, further consolidation and expansion through add-on acquisitions is likely to continue apace in 2021, providing plenty of opportunities for dealmakers and their lawyers.”

Looks like the cannabis industry is indeed here to stay!

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