Cannabis M&A grows as regulatory landscape changes

May 22, 2014

Practitioner Insights thumbnail 2(Editor’s Note: This post is an excerpt from an article appearing in Practitioner Insights on WestlawNext)

A new opportunity for M&A has grown in an industry that once seemed taboo: the cannabis industry. With the legal and regulatory landscape governing the quasi-legal substance shifting, marijuana-centered businesses have become quite attractive to acquirers.

In the past few years, the marijuana industry has benefitted from major legal and regulatory changes. Although the use, possession and sale of marijuana remains illegal in the United States under federal law, as of April 2014, 21 states and the District of Columbia have laws legalizing marijuana in one form or another.

While most of those states have legalized marijuana for medicinal purposes exclusively, Colorado and Washington have legalized recreational use. A number of other states, including New York, seem poised to address marijuana legalization in upcoming elections, and some states have decriminalized possessing small amounts of marijuana.

In Canada, the marijuana industry has also faced some regulatory changes. Pursuant to Canada’s new Marijuana for Medical Purposes Regulations (MMPR) under its Controlled Drugs and Substances Act, pre-approved medical marijuana users will have to purchase their supply from a newly licensed producer. Accordingly, commercial enterprises are taking advantage of these licensing regulations to become marijuana producers and sellers.

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