Brand house Cannabis One just brought in a top dealmaker to chase down unconventional deals in the nascent sector

Jeremy Berke

Aug 30, 2019, 17:32 IST

Courtesy of Cannabis One

Publicly-traded Cannabis One hired Joshua Mann, a former oil and gas exec and investment banker, to lead the charge on sourcing new deals.
Part of Mann's focus will be looking for deals that larger cannabis companies are avoiding: smaller dispensaries and brands doing $5-10 million in revenue, or companies that need "a haircut," said Mann in an interview.
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As multibillion-dollar deals make headlines in the burgeoning cannabis sector, one publicly-traded cannabis company is taking a different approach: hunting for a series of smaller acquisitions in the $5 million range.

To that end, the Canadian Securities Exchange-listed Cannabis One earlier in August brought in a top dealmaker in Joshua Mann as the firm's new president. Mann, a former oil and gas exec and the founder of Wildhorse Capital Partners, has deep experience across Canadian capital markets - where much of the money funding cannabis companies comes from - and will help connect the Denver-based company to deals and investors willing to fund them.

"We're not going to be everything to everyone, and we don't need to compete in the same sandbox as the Curaleafs of the world," Mann said in a recent interview with Business Insider. "They're playing a different game. They're focused on global domination. We don't need global domination to win."

Mann said he's looking to roll up smaller brands and networks of three or four dispensaries that are doing $5-10 million in revenue and may be too small or uninteresting to larger players. That, and looking for acquisitions that might need a bit of managerial help.

"We're not opposed to doing deals with a little hair on them that need a haircut," said Mann. "My whole mentality has been shrink to grow and cut the necessary fats."

Part of Cannabis One's strategy, as a Canadian-listed company but based in Denver, is the idea of what Mann calls "cross-border brand arbitrage," or taking proven brands in one state and porting that intellectual property over to another market.

For example, Cannabis One recently acquired Evergreen Organix, a Nevada-based edibles company with what Mann says are lots of existing consumers.

"Why shouldn't that developed brand with all of its IP [intellectual property] not be sold in Colorado?" said Mann. "All we have to do is stick their formulations into our existing brand channels and now we have a new brand offering."

On that front, Jeff Mascio, Cannabis One's CEO and a former commodities fund manager, said in a recent interview with Business Insider that core to the company's strategy for entering new markets isn't displacing existing brands, but rather acquiring them outright.

"It takes an average of two-and-a-half years to open a dispensary," said Mascio. "We want to acquire those companies that have already taken all the risks."

Part of Cannabis One's biggest challenge right now is getting the capital needed to fuel these acquisitions. "We're not in a market where you have an unending access to capital anymore," said Mann. "That window may open again, but you have to rationalize and focus on what you're good at."

Adding to those challenges is the fact that most large investment banks in the US won't help cannabis companies raise money since THC is federally illegal, said Mascio. And institutional investors, like pension funds and endowments, want nothing to do with a federally illegal industry.

"There's lots of trepidation but capital markets are slowly coming to the table," said Mascio. "This will be a part of Wall Street whether people want it to be or not."