- The publicly traded Cannabis One hired Joshua Mann, a former oil and gas exec and investment banker, to lead the charge on sourcing new deals.
- Part of Mann's focus will be looking for deals that larger cannabis companies are avoiding: smaller dispensaries and brands doing $5 million to $10 million in revenue, or companies that need "a haircut," Mann said in an interview.
- Register here for Business Insider's upcoming webinar on September 5, where Headset CEO Cy Scott will walk through his pitch deck and how he landed funding in the crowded cannabis space.
As multibillion-dollar deals make headlines in the burgeoning cannabis sector, one publicly traded cannabis company is taking a different approach: hunting for a series of smaller acquisitions in the $5 million range.
To that end, the Canadian Securities Exchange-listed Cannabis One earlier in August brought in a top dealmaker in Joshua Mann as the firm's new president. Mann, a former oil and gas exec and the founder of Wildhorse Capital Partners, has deep experience across Canadian capital markets — where much of the money funding cannabis companies comes from — and will help connect the Denver-based company to deals and investors willing to fund them.
"We're not going to be everything to everyone, and we don't need to compete in the same sandbox as the Curaleafs of the world," Mann said in a recent interview with Business Insider. "They're playing a different game. They're focused on global domination. We don't need global domination to win."
Mann said he was looking to roll up smaller brands and networks of three or four dispensaries that are doing $5 million to $10 million in revenue and may be too small or uninteresting to larger players — and looking for acquisitions that might need a bit of managerial help.
"We're not opposed to doing deals with a little hair on them that need a haircut," Mann said. "My whole mentality has been shrink to grow and cut the necessary fats."
Part of Cannabis One's strategy, as a Canadian-listed company based in Denver, is the idea of what Mann calls "cross-border brand arbitrage," or taking proven brands in one state and porting that intellectual property over to another market.
For example, Cannabis One recently acquired Evergreen Organix, a Nevada-based edibles company with what Mann says are lots of existing customers.
"Why shouldn't that developed brand with all of its IP [intellectual property] not be sold in Colorado?" Mann said. "All we have to do is stick their formulations into our existing brand channels and now we have a new brand offering."
On that front, Jeff Mascio, Cannabis One's CEO and a former commodities-fund manager, said in a recent interview with Business Insider that core to the company's strategy for entering new markets isn't displacing existing brands but rather acquiring them outright.
"It takes an average of 2 1/2 to open a dispensary," Mascio said. "We want to acquire those companies that have already taken all the risks."
Part of Cannabis One's biggest challenge right now is getting the capital needed to fuel these acquisitions. "We're not in a market where you have an unending access to capital anymore," Mann said. "That window may open again, but you have to rationalize and focus on what you're good at."
Adding to those challenges is the fact that most large investment banks in the US won't help cannabis companies raise money since THC is federally illegal, Mascio said. And institutional investors, like pension funds and endowments, want nothing to do with a federally illegal industry.
"There's lots of trepidation, but capital markets are slowly coming to the table," Mascio said. "This will be a part of Wall Street whether people want it to be or not."
- Read more:
- From Pax Labs to Surterra Wellness, VCs have poured over $1.6 billion into cannabis startups this year alone as investor interest in the burgeoning industry explodes
- Cannabis could become a $60 billion industry in the US. That's more than double the market for vitamins and supplements.
- Buzzy cannabis-delivery startup Eaze is looking to raise a new round that could value it at $400 million
- A group of Wall Street veterans just raised $250 million to chase down deals in the red-hot cannabis sector. Its CEO explains how it got Credit Suisse on board.
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