Marijuana Business Magazine October 2018

said. “At the end of the day, you want this to be a very diligent process that stays in the timeline of finishing due diligence but creates a sense of urgency.That’s how you can push to get a better price.” 2. Build Your Brand At Terra Tech, a publicly traded can- nabis company with retail and produc- tion facilities in California and Nevada, leaders have been vocal about making their business an appealing takeover target – under the right conditions. “In a perfect world, we’ll be able to uplist on the Nasdaq or NYSE and get real investment banks behind us and truly capitalize these companies. But right now, I have to stay flex- ible, because that’s policy-driven and something I can’t control,” said Derek Peterson, Terra Tech’s CEO. “We’re either going to be stand-alone, or we’ll try to position to be the most attractive takeover target there is.” Key to that strategy, Peterson said, is creating “barriers to entry for the competition” through branding and market saturation. Afzal Hasan, CEO at Ontario, Canada-based CannaRoyalty, agreed. In April, the firm acquired California- based FloraCal, a grower of high-end flower product, in a deal valued at more than $5 million. “FloraCal has been on the market for a number of years, and there has consistently been high demand for their products,” Hasan said. “Most importantly, when we looked at their sales it became clear that because of their product branding and consistency, consumers are willing to pay more for their premium product.” Both CEOs suggested the following to boost your firm’s appeal: • Beef up your brand. As the price of cannabis declines, brands become critical to commanding higher con- sumer demand and price. Product consistency and authenticity are key attributes to building a strong brand. • Embed your business and prod- ucts in key markets that will be attractive to potential suitors. Once there, saturate the market to deter competitors from swooping in. Put another way: “It’s as simple as if you have the best-looking house on the block in a great neighborhood, you’re going to command a higher price,” Peterson said. “It’s not rocket science, but the execution of that strategy is where the work comes in.” M&A ACTIVITY SPIKES T he first half of 2018 delivered an unprecedented spike in merger and acquisition activity, with nearly 150 deals announced across the cannabis industry, accord- ing to Viridian Capital Advisors, which tracks the sector’s investment activity in the United States and Canada. That’s almost double the activity during the same period last year. Among the top deals: • MedMen Enterprises signed a $53 million deal to acquire a Florida-based cultivator and secured the right to open up to two dozen dispensaries across the state. The acquisition of Treadwell Simpson Part- nership catapults MedMen – operator of 18 cannabis facilities in California, Nevada and New York – into Florida’s growing medical marijuana market, which is poised to become one of the nation’s largest. • Kush Bottles closed a deal worth more than $3.2 million to buy Colo- rado-based Summit Innovations , a purveyor of hydrocarbon gas used by marijuana extract producers. • British Columbia-based cultivator Emerald Health Therapeutics signed a deal worth $68.3 million (CA$90million) to buy rival cannabis producer Agro- Biotech . The agreement expands Emerald’s footprint into Quebec, Canada’s second- largest province. • Aurora Cannabis inked a deal to acquire rival Canadian cannabis producer MedReleaf in a transaction valued at $2.5 billion (CA$3.2 billion), creating one of the largest marijuana companies in the world. Deals among Canadian cannabis firms dominated the first half of the year’s activity and delivered the highest valuations as companies hustled to prepare for the country’s impending adult-use market, said Harrison Phillips, vice president at Viridian Capital Advisors. “But the U.S. is the end game for many operators because of the size of the market potential,” he said. The desire for a U.S. footprint and recent spike in capital raises is a strong signal that more investment is on the horizon, Phillips said. Through the first half of the year, cannabis firms across the globe raised more than $4 billion – more than triple the amount of funding in 2017. “The U.S. is still relatively untapped, and we’re far from the scale and magnitude that this industry could be operating at,” he said. “We expect that there is going to be signifi- cantly more capital coming into this space.” – Lisa Bernard-Kuhn Harrison Phillips is vice president at Viridian Capital Advisors. Photo courtesy of Viridian Capital Advisors