How to Seize M&A Opportunities in Marijuana’s Gray Market

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The conventional wisdom on Wall Street is that it’s impossible to time the market. Venture capitalists, however, know all too well that when investing in either startup companies or nascent industries, timing is everything. Nowhere is this more true, today, than in the emerging cannabis market.

To investors in the still developing cannabis industry, many believe the market is just now approaching its own inflection point, as it transitions from a black to gray market, characterized by a more attractive risk profile and outsized growth potential. The sticking point is that as a Schedule I drug illegal under federal law, cannabis still presents imposing obstacles for traditional investors, ranging from capital markets that remain inaccessible to uncertainty over bankruptcy proceedings. Yet, ironically, it’s these very same obstacles that make the opportunity so appealing to investors willing to operate in an indefinite gray area to create an ecosystem for a market expected to reach $75 billion in size by 2030. 

For most, the question isn’t whether the federal government legalizes cannabis, it’s how much longer investors will be able to capitalize on this undefined future to influence and profit from how the ecosystem ultimately takes shape. If the M&A market can serve as a leading indicator, the runway for investors is already becoming shorter as strategic buyers represent, both, a threat and opportunity. In fact, major players within Big Alcohol, Big Tobacco and Big Pharma have each made inroads in the space, which proves out the investment thesis, but will surely beckon added competition.

DT