Can Marijuana Industry M&A Activity Help Social Equity Entrepreneurs? (Op-Ed)
MJmooment

“It is essential that policies are designed to encourage a more equitable marketplace and reduce the risk of the cannabis industry becoming an oligopoly.” By Ari Hoffnung, Bridge West Consulting Merger and acquisition (M&A) activity in the New York cannabis market is at an all-time high. Four of New York’s ten vertically integrated medical cannabis companies are actively seeking regulatory approval to sell their New York license. While the terms of each acquisition differ, analysts have estimated that the value of a New York cannabis license may be worth as much as $300 million. There are many variables driving these blockbuster numbers—including the value of the company’s real estate assets and intellectual property—but the most valuable aspect of these vertically integrated licenses is their scarcity. Simply put, the fact that New York, a state with a population of 20 million people, has only awarded ten vertically integrated licenses and has opted to prohibit vertical integration for any new adult-use licensees, makes these ten licenses extraordinarily valuable. At the same time the medical companies are cashing in on their licenses, New York cannabis regulators, who intend to award 50 percent of adult-use licenses to social equity businesses, are seeking novel solutions to provide these businesses with the estimated $1 billion of startup capital required to successfully launch these businesses. At first glance, M&A activity is not likely to be viewed favorably by social equity entrepreneurs and other stakeholders. Nine figure transactions raise serious concerns regarding the ability of smaller players to effectively compete against much larger and well capitalized operators. That’s why it’s important to find some way to ensure that these mega transactions are used to help smaller operators succeed. To this end, I propose that New York implement the country’s first Cannabis License Transfer (“CLT”) fee on license sales…

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