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With A Wave Of Consolidation, The Cannabis Industry Rises To The Next Level

Right now, the biggest deals are happening in Canada

At the end of July, the cannabis industry watched as two Canadian companies set a new record. Aurora Cannabis acquired MedReleaf (another Canadian cannabis producer) for CA$3.2 billion — $2.3 billion in U.S. dollars. This, the largest cannabis acquisition to date, created a company capable of producing 570,000 kilograms of high-quality cannabis per year at a cost of below $1 per kilogram.

It was a validating moment for those of us in the industry. Cannabis as a business is still in its infancy. For the most part, we’re a group of entrepreneurs who were willing to take a chance on a product that, until recently, might have landed us in jail (or, at least, in some trouble with state authorities). The increase in mergers and acquisitions shows that we were smart to take the risk. In the first half of 2018, M&A activity nearly doubled from a year earlier to 145 deals in North America, according to Viridian Capital Advisors. Through June 22, public and private cannabis companies have raised $4 billion, up from $1.3 billion just one year ago.

Right now, the biggest deals are happening in Canada, which the U.S. market looks to as our future. While cannabis is still considered a Schedule 1 narcotic at the federal level here (despite the fact that it is legal to use and buy in two-thirds of the nation), the herb was recently legalized in Canada. That has not only paved the way for Canadian citizens to reap the medical and recreational benefits of cannabis, it also means Canadian companies can tap the financial markets, something U.S. companies still struggle to do.

 

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