Topic: Cannabis

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“Weeding out the competition” – an update on M&A activity in the cannabis sector

As discussed in previously, the legalization of cannabis in October 2018 sparked a flurry of activity in the Canadian market, as both foreign and domestic investors were eager to enter the space. Notably, in 2018, M&A transactions peaked with over 700 deals completed in the cannabis sector, the total value of which exceeded US$12 billion.

While high entry costs and capital expenditures may continue to be drivers of consolidation in the cannabis sector, there are other emerging factors that may significantly impact the trajectory of M&A activity. With the 2019 year-end rapidly approaching, a reflection on some of these … Continue Reading

Spreading like weeds: alternative cannabis products are on the way!

As we have previously discussed, Canada has positioned itself as a global leader in the cannabis space. That trend is set to continue on October 17, 2019, when it is expected that alternative cannabis products, which include edibles, infused beverages and topicals containing cannabis and cannabis concentrates will be legalized in Canada. The sale of a new and wider range of products will create valuable opportunities to tap into a growing market of consumers – particularly, those less comfortable with traditional cannabis consumption methods. According to a recent report published by Deloitte, it estimated that the Canadian market for … Continue Reading

Health Canada changes cannabis licensing process

On May 8, 2019, Health Canada announced that it is introducing changes to its cannabis licensing process, effective immediately. Before the change, an applicant can apply for a cannabis license by submitting paper application to Health Canada without having to build a facility first. Now, a new applicant for licence to cultivate, process or sell cannabis for medical purposes must have fully built a cannabis facility that meets all the regulatory requirements under the Cannabis Regulations at the time of submitting an application.

This change came about after Health Canada reviewed its existing licensing regime, which revealed that a major … Continue Reading

Cannabis and corporate governance: time for grow ops to grow up?

Since the legalization of recreational cannabis on October 17, 2018, the Canadian cannabis industry has experienced a significant boom. In its 2018 Cannabis Report, Deloitte predicted that legal sales of marijuana are expected to generate up to $4.34 billion in 2019. Moreover, and as previously discussed, Health Canada has introduced draft regulations governing the production and sale of edibles, extracts, and topicals, potentially providing additional growth opportunities for Cannabis companies to partner with the traditional food and beverage industry.

As the industry continues to grow, it is worth asking the question, how do these companies stack up from … Continue Reading

A budding investment – food and beverage investment opportunities and strategic partnerships in the growing cannabis industry

In December of 2018, Health Canada introduced draft regulations governing the production and sale of additional cannabis products, namely edibles, extracts, and topicals (the Cannabis 2.0 regulations). These regulations are set to take effect no later than October 17, 2019 and will introduce notable opportunities for food and beverage companies to enter into strategic partnerships with cannabis industry players.

In a recent report, Deloitte projected that legal, recreational sales are expected to generate up to $4.34 billion in Canada’s cannabis market in 2019. Further, Deloitte estimates that six out of 10 likely cannabis consumers will purchase and use … Continue Reading

Beware the zombie invasion (stock exchange edition)

On September 18, Deloitte released a new report which outlines a roadmap for the competitive business climate in Canada. Included in the report is a warning that “Canada may have a zombie problem.” Luckily, Deloitte isn’t raising concern about hordes of flesh-eating undead, but rather the relatively large number of “zombie companies” that exist on Canadian stock exchanges. The report identifies “zombie companies” as those who do not have enough earnings to cover their interest payments and found that out of the 2,274 companies listed on the Toronto Stock Exchange and the TSX Venture Exchange, 16% could be considered “zombies” … Continue Reading

Grow on! Examining the forces behind increased M&A activity in Canada

The Canadian market has seen a surge in M&A activity since 2017 and it looks as though 2018 will follow suit. According to a PwC Canada 2018 M&A mid-year review, in the first half of 2018 alone, Canada hit CAD$93 billion  in M&A activity and outbound deals increased by 8% as compared to the first half of 2017, largely due to a surge in cannabis sector deals. While we have noted this increase previously, recent legislative changes regarding cannabis warrant another look to determine the robustness of this trend. For example, in health-care, overall deal value and deal volume … Continue Reading

Gauging the impact of a Canada-U.S. trade war on cross-border M&A

On May 31, 2018 the United States (U.S.) government announced that it would be imposing tariffs on a number of Canadian products, including steel and aluminum at a rate of 25% and 10% respectively. In response, the Canadian government imposed its own surtaxes of approximately C$16.6 billion on imports of steel, aluminum, and other products from the U.S. These countermeasures came into effect on July 1, 2018 and will remain in force until the U.S. repeals its tariffs on Canadian steel and aluminum.

At a market level, this escalating “trade war” between Canada and the U.S. has the potential … Continue Reading

Will Canada soon be a global leader in the cannabis space?

Recently, the Cannabis Act was granted Royal Assent, resulting in the official passing of the legislation for legalizing cannabis in Canada. The Act is expected to be in force as of October 17, 2018.

The Canadian government’s decision to legalize recreational marijuana may significantly impact capital markets and M&A deals. The decision to legalize recreational marijuana at the federal level is unique to Canada, compared to other jurisdictions like the U.S. where it remains illegal federally and is currently regulated by states (such as Colorado, California and Washington).

While the state model in the U.S. has experienced some early success, … Continue Reading

Cannabis: a budding Canadian industry

Last week, we covered EY’s recently released report (the Report) surveying the bourgeoning cannabis sector in Canada.

The impending legalization of cannabis has weighty implications for the Canadian economy, but may also impact the global markets more broadly. Capital markets, the jobs market, mergers and acquisitions activity and intellectual property, among others, stand to be significantly affected.

This is an unprecedented opportunity for the country to be the global leader in the cannabis space, to shape the regulatory framework for cannabis around the world and to spur innovation and economic productivity – The Report

Review

Following the most … Continue Reading

Consolidation within the cannabis industry

As the government prepares for legalization of recreational marijuana this summer, Canada’s cannabis producers and distributors are bracing themselves for a period of consolidation leading up to and following legalization. A recent report published by Ernst&Young (EY) provides insight into the current state of Canada’s cannabis industry. EY surveyed 11 licensed producers and found that many of those surveyed believe that consolidation in the cannabis industry is inevitable due to the high barriers for new players. Two of the biggest hurdles cannabis producers and distributors face is difficulty obtaining financing from banks and the slow speed at which … Continue Reading

CSA, TSX and TSX Venture Exchange provide expectations for reporting issuers with activities in the U.S. cannabis industry

Last year, we discussed predictions of increased M&A activity in the cannabis sector, given the federal Liberal Government’s push to legalize cannabis for recreational use.  That push picked up steam earlier this year with the introduction of the Cannabis Act (which we summarized here).  When implemented, the Cannabis Act will legalize cannabis for recreational use in Canada.  Part of the optimism for increased M&A activity in this space may have been due to perceived opportunities for United States / Canadian cross-border transactions, given the size of the U.S. market generally as well as perceptions of growing acceptance … Continue Reading

Budding M&A and financing activity in the marijuana industry

In September 2016, this blog noted that analysts were predicting higher levels of M&A activity in the marijuana industry. Early last month, we commented that the launch of several Canadian marijuana “streaming” companies – which provide financing to start-ups in exchange for a portion of the start-up’s future product at a fixed price (or a percentage of the start-up’s future profits from that product) – promised to provide an alternative avenue of raising capital for start-ups.

According to data published by Viridian Capital Advisors, a strategic and financial advisory firm dedicated to the cannabis industry, investment and M&A activity … Continue Reading

Smooth sailing for marijuana start-up streaming deals?

On April 13, 2017, the federal government introduced Bill C-45 in the House of Commons. This proposed legislation marks an important step towards the Liberal government’s promise to legalize and regulate the possession, sale, and distribution of cannabis in Canada before July 1, 2018. As the bill currently stands, upon coming into force, Canadians over the age of 18 will be able to legally purchase cannabis from provincially authorized retailers.

While Canadians have been able to access cannabis for medical purposes for some time (and producers have been able to apply to Health Canada for a licence to cultivate … Continue Reading

M&A activity predicted in the marijuana industry

The marijuana industry has been high on analysts’ lists ever since Justin Trudeau and the Liberal Party were elected in late 2015. Some analysts predict the legalized pot industry to be a $5 billion market in Canada alone. Thus, it is clear that a new and lucrative market is burgeoning.

Analysts are predicting a high level of M&A activity in this space. The industry is currently comprised of many small players, which makes it attractive for bigger and more established corporations. Todd Hagopian, an analyst operating a market fund focused on the biotech industry, is predicting that big pharmaceutical corporations … Continue Reading

Commercial medical marihuana: a potential multi-billion dollar industry?

In July 2013, the government adopted the Marihuana for Medical Purposes Regulations (the MMPR), superseding the 2001 regulations on the same subject matter. The MMPR became fully implemented on March 31, 2014, dramatically changing the rules of supply of medical marihuana, from a cottage industry in which approved patients grow their own or buy from small producers, to a free-enterprise system with no limits on the number the large-scale growers charging what the market will bear. It is expected that the new regime will create a private industry eventually worth some $1.3 billion in sales annually with perhaps up … Continue Reading

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