• New York is shaping up to be the next hot spot for cannabis M&A.
• Canadian cannabis giant Cronos recently struck a deal with private US company PharmaCann.
• PharmaCann is one of the few cannabis companies operating in New York.

As New York's recreational cannabis industry shapes up, companies are making deals to take full advantage of the emerging market.

On Monday, Cronos Group, a Canadian cannabis company backed by Altria, said it agreed to make a "strategic investment" in US cannabis company PharmaCann, which has operations in New York. Cronos paid $110.4 million for an option to acquire a 10.5% ownership stake in PharmaCann, once cannabis is federally legal in the US.

PharmaCann is privately owned and operates in six states: New York, Illinois, Ohio, Maryland, Pennsylvania, and Massachusetts.

Canadian companies have been vocal about their intentions to enter the US market as soon as they're able to do so. Cannabis, though legal for medical use in 36 states and adult use in 16 states, is still considered a Schedule I drug by the US federal government.

Canopy Growth, the largest cannabis company in Canada, has deals with two US cannabis companies - Acreage Holdings and TerrAscend - that would let it target US cannabis consumers once the market opens up to it. Alcoholic-beverages giant Constellation Brands owns a large stake in Canopy.

Once New York's cannabis market ramps up, annual sales could reach $5 billion to $7 billion, according to estimates from analysts at Stifel and Cantor Fitzgerald, respectively.

The Cronos-PharmaCann deal comes a few months after US cannabis company Ascend Wellness said it would take a majority stake in MedMen's New York operations for $73 million.

Several other cannabis companies are also likely targets in the lucrative New York market.

Click here to read more about the deals you can expect in New York as the state legalizes cannabis. This article is available exclusively to Insider subscribers.