With talk of a looming recession, many analysts predict that during a downturn there will be a short list of growth industries that can deliver a healthy return on investment. Cannabis is near the top of that list. In fact, spending on legal cannabis in the U.S. is expected to increase from the current $12.9 billion to $20.4 billion in 2022, according to New Frontier Data.
As investors aggressively pursue opportunities in the industry, the pace of consolidation continues to accelerate. We’re seeing an increase in buy-side due diligence inquiries that correlate with an increase in publicly reported acquisitions.
Among the investors pursuing deals are heavyweight players from big pharma, tobacco and liquor, as well as institutional investment companies like BlackRock. As legal issues get resolved and public support increases, the cannabis industry will become increasingly attractive to institutional investors. A recession in the U.S. could further push more investors into cannabis, chasing yield in the strongest growth market over the last few years.
Existing cannabis businesses, including large cannabis companies traded on the Canadian exchanges, further crowd the field of potential buyers. These businesses see acquisition as a fast way to build brand, expand market footprint, and raise their public market value. Regional players are also in the game, buying up smaller companies within their sphere of influence to increase their size and, ultimately, position themselves for their own lucrative exit down the road. [Read More @ Cohn Reznick]