EXCLUSIVE: How Regulatory Reforms Could Reshape M&A Pulse In Cannabis Industry

The cannabis industry's mergers and acquisitions (M&A) landscape is undergoing a transformation, as highlighted in a recent panel discussion led by Scott Greiper, founder and president at Viridian Capital Advisors, at the Benzinga Cannabis Capital Conference in Chicago.

This evolving sector has witnessed significant changes in recent years, reshaping the strategies of key players.

Cannabis M&A Landscape And Regulatory Prospects

Greiper emphasized the historical significance of M&A in the cannabis industry, noting that multi-state operators (MSOs) were driving M&A activities, capturing 80 cents of every dollar raised in the sector. However, a market correction approximately two years ago shifted the dynamics towards a more conservative, buyer's market.

One critical development discussed was the potential passage of the SAFE Banking Act, which could provide financial stability to cannabis companies, potentially attracting investors.

See Also: MSOs And Cannabis Rescheduling: A Safer Bet? Analyst Looks Closer At Pros And Cons

Marc Beginin CEO of Prodigy Processing Solutions, highlighted the Secure and Fair Enforcement Regulation (SAFER) Banking Act's approval by the Senate Banking Committee and the possibility of its passage in the House. However, the panel acknowledged that even with regulatory changes, cannabis would remain a highly regulated industry.

Aaron Miles, chief investment officer at Verano Holdings Corp. VRNOF, drew attention to the significant impact of the 280E tax provision, estimating potential annual tax savings of $700 million for top public MSOs with reform. Miles underlined the importance of preserving cash and managing unique legal challenges, comparing their financial strategy to "putting $350 million on a credit card."

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Diverse Perspectives On Cannabis Regulatory Reforms

Panelist Jack Mascone, head of capital markets at Seaport Global Securities LLC, expressed optimism about both the SAFE Banking Act and the eventual rescheduling of cannabis. He believed these changes would normalize the industry, enhance cash flow, and make M&A opportunities more competitive.

The discussion also touched upon the rescheduling of cannabis, with differing opinions on its likelihood.

Tracy Gallegos, partner at Duane Morris, was skeptical due to formal rulemaking processes and international treaty considerations, while Miles cited recommendations from the Department of Health and Human Services as a sign of its probable development.

Cesar Reynoso, CPA National Public Company practice leader and partner at MGO, added to the conversation, saying, "Regulatory changes could attract more institutional investors and lower the cost of capital." Reynoso's perspective highlighted the potential for a more competitive M&A landscape in the cannabis industry.

With regulatory reforms on the horizon, the M&A landscape of the cannabis industry appears to be on the brink of a potential transformation. Join the conversation at the Benzinga Cannabis Capital Conference, the place where deals get done, which is taking place this week in Chicago. 

Read Next: EXCLUSIVE: The Business Of Cannabis Is Tough Right Now—How Can Companies Ensure Successful M&A Deals?

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