Marijuana Business Daily had an article recently discussing investors targeting distressed companies in the cannabis industry (link). I have written extensively about some of the points made in the article, from the lack of access to capital to the problems of restructuring a cannabis company without access to Chapter 11 bankruptcy, all of which are top of mind as of late. However, I would like to focus on an ancillary point made in the article, namely that more investment banks are exploring ways to get involved in the cannabis industry.
I have seen this develop over time, having gotten to know more professional and financial services firms coming into the industry – not only investment banks, but accounting firms, private equity firms, valuation firms, consulting firms, and other Biglaw firms (link). This is likely driven, in my opinion, by firms taking the time to truly evaluate and underwrite the risk of doing business with the cannabis industry (on which I and my colleagues advise for services firms), as well as eyeing an opportunity.
Certainly, all of this is a net positive – the industry can never have too much knowledge and expertise. At the same time, it provides the early movers – those of us who developed a deep knowledge of this (still relatively close-knit and unique) industry and strong relationships with its participants – with the opportunity to provide the critical value that such knowledge and relationships provides. This is similar to how some early operators (cultivators, manufacturers, distributors) that took the risk to build the foundation of the state-legal industry still stay ahead of the curve.