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Why the Cannabis Sector is Ripe for More Mergers and Acquisitions

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The cannabis markets continue to grow globally and across the North American markets. In the U.S. with the possible legalization of recreational use on the radar, large marijuana companies are looking at a $22.7 billion national market by 2023, and Canada's direct cannabis market is projected to double to 11 billion Canadian dollars ($8.2 billion) in the next six years. The markets are growing and so are the companies. There are two main ways for companies to grow and they are organic growth of revenues and the shortcut; mergers and acquisitions. Experts expect many more acquisitions in the coming months. In fact, the competition has already begun with key M&A transactions in both Canada and the U.S. The activity in Canada is focused on the acquisitions of Licensed Producers (LP) and in the U.S. it's the multi-state operators (MSO).  In Canada, it has been the consolidation of LPs to grow revenue generation. In the U.S., the addition of brands and retail outlets that is generating revenue growth.  

In Canada, the size of the pool of targets is approximately 140 - 168 companies with existing approved licenses. In the U.S. there are over 50 publicly-traded companies. Insiders say that many of these companies will diminish over time because they will be unable to have the resources to compete and we will see continued consolidation in this pool.  Many experts expect to see these companies 'get married' once it is shown that they cannot carry on or grow by themselves. They may be their only way to be able to survive, compete and even thrive.

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