M&A activity in the cannabis industry is down, but may see an uptick as dealmakers have shifted focus and learned from past mistakes.
Scott Hammon, a partner at MGO and leader of the MGO | ELLO National Cannabis Practice, highlighted a fact prominently featured in its M&A field guide: “In 2019, a combination of decreases in valuations, regulatory issues, and corporate governance issues, resulted in 95 cannabis industry M&A deals, worth more than $2.4 billion, being canceled or unwound.”
“Markets were slower to roll-out and come online than expected, and regulatory, financial and operational obstacles suppressed profitability,” said Hammon.
Volume in 2020 is also down. However, after the peak concerns of the COVID-19 pandemic, Reuters reported that companies will likely want to find their way into more niche sectors of the space and all-stock deals are “expected to be the trend.”
Matt Hawkins, founder and managing partner at Entourage Effect, highlighted how the pre-COVID capital crunch distressed the market, but stronger companies emerged.