M&A Activity and valuations - Retrospective

With the rapid development of the global cannabis market, M&A activity has also accelerated and reached an all-time high during the fourth quarter of 2018. Canada and the United States are responsible for the largest part of market consolidation in the past years. This can be explained by the fact that the North American cannabis market is currently the fastest-growing market, which is mainly due to the head start in legalization it has in comparison to other regions. Another observation is that most transactions took place in the industrial hemp or medical cannabis segments. These are expected to be the two fastest-growing market segments.

Global M&A activity in the cannabis industry

Case studies of acquisitional cannabis companies

Contrary to many other industries, the rationales of M&A activity in this sector don’t show a clear-cut picture. Companies making acquisitions in various end markets and other parts of the value chain are quite common, as

shown in these two examples.

M&A Activity

The valuations of acquired companies in comparison to their financial performance were very high, reflecting expected growth. As often with an emerging new industry, a clear red line cannot be discovered. A selection of transactions is depicted below.

Comparable transaction analysis cannabis companies

Stock performance of a selection of publicly listed cannabis companies

For most transactions, the purchase price was paid in shares instead of cash. The high valuations of listed cannabis

companies facilitated tremendous M&A activity and resulted in high prices (on paper). However, publicly listed cannabis companies are struggling to meet investors’ expectations. This is mainly due to:


  • time-consuming permit processes
  • supply chain and quality challenges
  • persistence of the illegal market in countries where legalization has been adopted
  • slower-than-expected global cannabis legalization


Listed companies are now ‘facing reality’ as highlighted in the market development section. Therefore, valuations decreased drastically in the second half of 2019, making it more difficult to make acquisitions by paying with shares. This has made investors more cautious and careful when investing in the volatile cannabis industry. As such, capital raises in the industry have been decreasing gradually ince the last quarter of 2018. Nevertheless, valuations of listed

cannabis companies remain strong. This is positive for M&A activity.

Share this article

“OriginHouse received
an acquisition offer from the US-based cannabis company Cresco Labs, which is considered to be the largest-ever public company acquisition in the
US cannabis sector.”

Sector view by Afzal Hasan

Afzal Hasan, president and general counsil at

Origin House, sketching the cannabis landscape.