A Flurry of Cannabis M&A Activity in 2022
By Robert Hoban
There is a fire on the mountain. That is the best way to describe the pace of the cannabis industry in 2022. We are witnessing a torrid start as it relates to cannabis M&A. On March 23rd, Cresco Labs become the market leader in cannabis with the acquisition of Columbia Care. The graphic below illustrates the enormity of this deal, and reflects the large number of historical transactions leading to this effective industry consolidation. As a result, Cresco becomes the largest multi-state operator (MSO) by pro forma revenue ($1.4B), with a footprint of over 130 stores in eighteen U.S. markets, among many other significant milestones and market shaping elements brought to light by this transaction.
The next day, on March 24th, Australia’s Incannex Healthcare paid $93.3M to acquire Dutch medical cannabis company APIRx Pharmaceutical BV. Incannex was one of the first ASX-listed companies to make forays into cannabinoid and psychedelic therapeutic drugs (it was originally a direct-to-consumer dental business, which disrupted the dental space). This deal positions Incannex to target the $120 billion global addressable market of cannabinoid and psychedelic therapeutics.
While vastly different transactions in many ways, these two deals highlight trends that we have seen over the past several years which suggest that North America’s industry development (and corresponding M&A trend) focuses on effective adult-use distribution and access to the largest cannabis global consumer base with a focus on revenues and post-prohibition positioning. On the other hand, the international marketplace is far more focused on true medicinal, pharmaceutical development, infrastructure, data, formulations, and the continued development thereof.
It will be exciting to see these two notions merge following legal and policy reform in the United States, which ultimately opens up U.S.-based capital markets to this sort of activity. That is truly when the rubber meets the road. This will require larger companies to become far more deliberate and pointed in their path to revenue. Inherently, these two transactions reflect hugely distinct business models, which will likely dictate the evolving investor approach in the years to come. Cannabis M&A is on fire and, at this stage, it would take a whole pail of water just to cool it down.
