Latham-London: Cannabis Rethink Sparks PE Interest


Cannabis Rethink Sparks PE Interest By Latham & Watkins on January 18, 2022 Posted in M&A and Private Equity The once shunned cannabis sector now offers attractive PE opportunities in many jurisdictions. By Stuart Alford QC, Tom D. Evans, Eveline Van Keymeulen, Elizabeth Richards, David J. Walker, and Catherine Campbell In years gone by, the prospect of significant PE investment in the cannabis industry would have been unthinkable for many. However, regulatory and legal developments have created opportunities for medical cannabis businesses and legalised new non-medical cannabis applications in many jurisdictions. According to Pitchbook, buyout firms invested US$3.54 billion into the cannabis sector in 2021 across 223 transactions, showing significant appetite for deals. PE firms now have scope to embrace growing medical and consumer interest in certain jurisdictions, while in others, such as the US, evolving legal restrictions continue to challenge investors. Medical Use Uptake In Europe, medical cannabis is essentially regulated at the national level. In 2017, Germany legalised medical cannabis, followed by the UK a year later. Several other countries are now considering whether to follow suit, including France, Ireland, and Denmark, all of which have initiated pilot projects to explore legalisation. The acquisition of Neuraxpharm — one of the first European pharmaceutical companies to include medical cannabis products in its portfolio — demonstrates increasing sponsor and investor appetite for companies pursuing authorised medical applications of otherwise restricted products, including cannabis. Booming “Wellness” Business Despite the use of hemp having been authorised in Europe for decades, until recently, the use of hemp-derived CBD in cosmetics and food was prohibited in the EU, as CBD was considered a narcotic as a cannabis extract. Notably, plenty of products were available, and enforcement was infrequent. In November 2020, the European Court of Justice took a significant step toward softening the EU position, ruling in favour of French retailer Kanavape that…

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Source : Latham-London: Cannabis Rethink Sparks PE Interest

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