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COVID-19 Shutdowns Spur Growth In Cannabis Delivery Service Mergers & Acquisitions

COVID-19 Shutdowns Spur Growth In Cannabis Delivery Service Mergers & Acquisitions

The COVID-19 pandemic shutdown spurred growth in all sorts of direct-to-consumer delivery services.  Cannabis delivery was no exception. 

“Certainly, with COVID, the direct-to-consumer business expanded quite considerably,” said Unrivaled Brands CEO Frank Knuettel.

“I think these M&A transactions are a part of a bigger phenomenon, which is the growth of delivery,” said investment banker Frank Columbo, director of data analytics at Viridian Capital Advisors, which tracks capital raises, mergers, and acquisitions in the cannabis sector.

Already a booming industry, cannabis delivery has become a highly desirable target for mergers and acquisitions.

Companies immediately gain access to an existing base of loyal customers and delivery expertise to apply to their existing operations. Delivery is becoming a highly lucrative market for cannabis supplies.

Recent Delivery Service Acquisitions:

  • Stem Holdings to acquire Driven Deliveries (CA)
  • Cresco Labs acquires Bluma Wellness (FL)
  • Terra Tech (now Unrivaled Brands acquires SilverStreak Solutions (CA)
  • Fiore Cannabis intent to acquire California Patients Club (CA)
  • Columbia Care acquires Green Leaf Medical (includes home delivery in MD & VA)

The vast California market “is critically important because of the nature of local regulation,” Columbo said. “Many California jurisdictions have opted out of allowing dispensaries, home delivery allows companies to reach out to places where they would have loved to have had a dispensary, but can’t.”

Stem Holdings acquired California cannabis delivery company Driven Deliveries and become Driven by Stem.

After observing the increase in deliveries of all kinds of consumer goods during the pandemic, “we realized that we needed to be in that last-mile delivery business,” Driven by Stem CEO Adam Berk said.

Scarce capital in the cannabis sector is driving an industry-wide trend toward consolidation.

“In states where direct-to-consumer (delivery) is allowed, I certainly would expect to see an increased trend of acquisitions,” said Knuettel. “At a micro level, (direct-to-consumer delivery) is one of the more appealing asset classes in the cannabis sector.”

Viridian Capital’s Columbo similarly expects to see delivery-related deals continue in the context of overall e-commerce growth.

“E-commerce is growing at multiples of the growth of in-store commerce,” he said. “And I think that that same thing will be happening in the cannabis world.”

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