It's shopping season in Canada's cannabis industry.
M&A activity within the Canadian cannabis sector is heating up and is expected to persist for months as licensed producers seek strategic opportunities to expand their market share while also eyeing a potential pathway toward profitability through cost-cutting.
That activity comes after a recent rush in acquisition announcements from two of the country's top cannabis producers: Hexo Corp. and Canopy Growth Corp., both of which have made several multi-million dollar deals to capture a leading share of the Canadian cannabis market.
Indeed, several cannabis executives told BNN Bloomberg their phones have been ringing more frequently over the past several weeks, with interested bankers or rival operators inquiring about their appetite for a sale.
"Everything was always calling for mass consolidation in the industry and we saw it building, but it's really happening now," said Eric Foster, a partner at Dentons Canada LLP who leads the firm's cannabis practice.
"What we've seen is the smaller LPs and the private LPs putting up their 'For Sale' sign and start some strategic process because it's increasingly hard for them to rationalize their business, find that path to profitability and experience the kind of growth they were expecting."
Data from Viridian Capital Markets shows a strong start in 2021 for M&A activity on both sides of the border. The New York-based cannabis consultancy said there's been 137 deals so far this year, compared with just 32 in the same period last year. While U.S. M&A activity has already hit a new record, Canadian deals are also roaring back this year with 29, more than double what happened in the same period a year ago.