By Bill Gordon
The legal cannabis industry is continually expanding, and the year behind us is a great example.
2018 was a major year for marijuana legalization both in the United States and in Canada, where it was legalized on the federal level.
It looks like the US is going to go down the same route and big companies are getting ready to invest in this lucrative field of economy.
One of the main reasons why the biggest players are still just observing the market is the fact that marijuana is legal in less than 50 countries worldwide, and it’s still a controversial topic in the big part of the United States.
The stigma, however, will likely change dramatically in 2019 since some significant mergers and acquisitions have already taken place.
As suggested above, the cannabis industry is in its infancy years, but some giant steps are being made. Last July will be remembered as historical. Aurora Cannabis acquired another cannabis producer, MedReleaf, for a staggering $2.3 billion. The new company will be able to produce 570,000 kilograms annually, at the cost lesser than $1 per kilo.
Aurora Cannabis acquisition was not the only one during 2018. According to Viridian Capital Advisors, another 145 merges happened in the United States which resulted in $4 billion investments in the cannabis market. This number sounds impressive, especially if we look at 2017 when big players raised around $1.3 billion.
Of course, Canada is the biggest market for legal cannabis, thanks to the recent legalization of the herb. While investments are getting bigger in the United States, marijuana still remains Schedule 1 narcotic on the federal level, and this might affect the market. Regardless of that, big companies should try and risk some capital and get in the game soon.
Small businesses are already being merged with big pharmaceutical and alcohol companies in Canada, and this pattern will probably be repeated in the United States once cannabis becomes completely legal. For example, a company that stands behind Corona and Modelo, Constellation Brands, invested in Canopy Growth, Oregon-based cannabis producer. If Constellation goes through with the purchase, the deal between Aurora and MedReleaf will go to history. The whole acquisition will be worth $3.45 billion.
The American market is still not completely open for business, but some deals are made, as mentioned above. MedMen, the ambitious cannabis retailer, recently bought Treadwell Nursery, Florida-based grower and distributor, for $53 million. In addition, four marijuana businesses joined together and created TILT Holdings which will bring them $70 million in 2019.
This year will most likely bring a lot of new acquisitions even in the United States since the day of complete legalization is around the corner. More and more companies will follow the business moves of Aurora and Constellation, so we can expect the growth of the market in years to come.