Greenlane Holdings, Inc. is buying vaporizer technology company DaVinci for “up to $20 million in total consideration, comprised of a mix of cash and stock,” Nick Kovacevich, CEO of Greenlane said. The deal is expected to close in the fourth quarter of 2021.
“DaVinci leads the way in innovative portable vaporizers and we are thrilled to bring them into our owned brand portfolio,” Nick Kovacevich, CEO of Greenlane said in a statement.
DaVinci is an industry leading brand differentiated through its groundbreaking Clean First innovation, which employs medical grade materials and quality, proprietary manufacturing processes. DaVinci’s product line has grown significantly since the launch of its award-winning IQ vaporizer in 2016 to include new models such as the MIQRO, the world’s smallest premium loose-leaf vaporizer, IQ2, the world’s first on-device dosage control, and the IQC, equipped with a patented ShareSafe mouthpiece created from an FDA-approved antimicrobial polymer.
Here, Kovacevich talks more about the DaVinci deal, Greenlane’s outlook, the wider cannabis M&A landscape, and more.
Jackie Bryant: Cannabis M&A activity is cranking once again with little signs of slowing down. What made DaVinci attractive from an acquisition standpoint and why is Greenlane acquiring them now?
Nicholas Kovacevich: We are always committed to executing our mission of elevating all elements of the consumption experience. DaVinci has been a great long-time partner of ours that has been catering to evolving consumer needs for years and now stands at a critical inflection point, where we can take what they’ve built and create a truly “1+1=3” opportunity.
Also, their team possesses a lot of know-how that adds considerable value to Greenlane. Leveraging the combination of DaVinci’s team and innovative technology with Greenlane’s infrastructure and expertise will provide our customers greater access to premium vaporization. The size, scale, valuation, and timing just all made sense and we are thrilled to have locked in this acquisition.
JB: How long have you been tracking DaVinci as a potential M&A target?
NK: DaVinci has been part of a long list of acquisition targets that we’ve been carefully evaluating for a number of years now. We are very selective as to which companies to acquire and when to acquire them. As a seller of third-party brands, we have a great opportunity to build relationships and understand trends before deciding to pursue M&A talks with anyone in our ecosystem.
JB: There are many vape brands out there, so I’m curious to know why didn’t Greenlane acquire another brand, like PAX, for example?
NK: PAX has been a long-time trusted partner of ours as well, and we’re very excited to continue working with them in the long run. There may be some opportunities down the road, but as far as DaVinci was concerned, all the pieces lined up from a size, team, valuation, and timing perspective. With federal legalization on the horizon, we remain laser-focused on building out our portfolio of intellectual property (IP) to protect (as a moat) against future competition which will ramp up post-legalization. To no surprise, DaVinci has some strong, unique IP which was very compelling when considering the transaction.
JB: Discuss opportunities for DaVinci to leverage the broader Greenlane network and infrastructure to accelerate growth and capture market share.
NK: Greenlane can provide a stronger go-to-market plan with more robust marketing strategies, as well as significantly more scale and resources. The combination of their relentless innovation and team with our scale, resources, and infrastructure will provide more customers with better access to premium products at affordable prices.
They also have a strong pipeline of new potential products that we can shape and influence before they come to market.
JB: How does this acquisition boost Greenlane’s bottom line and drive growth?
NK: Part of our acquisition strategy is to acquire companies that are already profitable as a stand-alone, then plug them into our shared services model to find SG&A synergies, and into our supply chain and distribution footprint which should dramatically increase sales, garnering further efficiencies which increase total company profitability. DaVinci fits perfectly into this strategic plan.
JB: What is your outlook on acquisitions for the remainder of the year?
NK: We are lucky to have a robust pipeline of acquisition opportunities, as one of the only companies with a platform to roll up ancillary CPG companies in the cannabis sector. However, we intend to be opportunistic as we execute on the M&A strategy, knowing we also have the capability to also build brands in-house. We intend to do both in the coming quarters.
JB: Are there other types of cannabis companies Greenlane is looking to acquire?
NK: Absolutely. Our pipeline is full of ancillary cannabis companies that we believe can be margin accretive, enhance our market share and product portfolio, fit with our culture, and are led by driven and disciplined leaders.