Earlier this month, a blockbuster deal kicked off the 2021 cannabis merger-and-acquisition season, when Ireland-based Jazz Pharmaceuticals inked a $7.2-billion deal to acquire United Kingdom-based GW Pharmaceuticals, the manufacturer of the Food and Drug Administration-approved Epidiolex. It was the biggest handshake yet for the cannabis industry, and it could be just the beginning of what’s to come in a global market still in its infancy.
At Fox Rothschild, a Philadelphia-based law firm with a national cannabis practice group, Partner Melissa Sanders and Associate Jared Schwass told clients there is much more room for businesses to expand in an alert they released Feb. 1.
Sanders advises corporate clients on a wide range of business matters, with a particular focus on mergers and acquisitions, private placements of securities, financing transactions and ownership transition programs. Schwass is an attorney in the corporate department and a member of the firm’s Cannabis Law Practice Group. He advises businesses entering and operating in the legalized cannabis market on regulatory compliance, risk mitigation and business transactions.
“At the end of 2020, we saw an uptick in merger-and-acquisition activity as the industry shook off some pandemic-related instability, and we expect that trend to increase significantly in 2021,” they said in the alert.
“Despite abundant money available to the large multi-state operators (MSOs), most cannabis companies still have relatively limited avenues to raise capital due to the federal illegality of the industry,” they said. “However, that may change soon with the democrats now controlling both houses of Congress and the White House.”
When cannabis is descheduled, Sanders and Schwass said they anticipate an influx of cash into the sector, as previously reluctant investors and institutions enter the market without fear of federal repercussions.
Here, Sanders and Schwass share more about M&A activity trends, anticipations and indicators, and how MSOs and smaller businesses alike can position themselves for possible growth opportunities.
Tony Lange: What stood out most about how M&A activities shaped up in the 2020 cannabis industry?Fox Rothschild | foxrothschild.comMelissa Sanders, partner
Melissa Sanders: I think we were seeing a lot of the trust assets being snapped up. And even outside of the trust assets, there were some good deals to be had. As we’re moving into 2021, that’s continuing. But I think that with the change in the Senate and legalization potentially on the forefront, additional capital is coming in and we’re going to see more M&A overall.
Jared Schwass: When COVID-19 first hit, there was kind of a lull in activity. Then, when medical necessities and distressed assets became available, that’s when the serial acquirers were buying up. And then we did see, towards the end, a couple of mergers that that were big news. I feel like more of that’s going to