Curaleaf’s (TSX: CURA; OTCQX: CURLF) hostile bid for Aurora Cannabis (NASDAQ and TSX: ACB) has dominated recent cannabis M&A headlines. But beyond that high-profile takeover battle, Vireo Growth (CSE: VREO; OTCQX: VREOF) has been assembling an expanding portfolio of cannabis assets through acquisitions.

Can aggressive acquisitions deliver sustainable growth in 2026, when earlier cannabis buyers struggled to sustain the businesses they assembled?

Village Farms International (NASDAQ: VFF) offers a contrasting approach. Rather than acquiring existing operators, it is expanding production and finding new buyers through a greenhouse platform it already controls, including by converting space within existing facilities. Vireo, meanwhile, is building scale by purchasing businesses already in operation.

Each approach carries a different investment calculation: how much additional capital an existing operation needs to produce and sell more, and how much a buyer must commit to acquire and sustain another business’s earnings.

In Q2 2026, Village Farms’ cannabis revenue increased a modest 5%, while its adjusted EBITDA margin rose from 25.8% to 28.5%. 

Vireo’s cannabis revenue increased 265.5%, largely through acquisitions, while its corresponding margin fell from 27.7% to 22.4%, according to its quarterly releases. 

These company-defined adjusted EBITDA margins indicate changes within each business; they do not establish comparable cash returns.

Neither route guarantees a better return. An existing facility benefits from earlier investment, while an acquisition can offer attractive economics when the purchase price is low enough. 

Figure 1. Sources: Village Farms and Vireo, Q2 2026 results releases.

Getting more from the existing business

Village Farms brings an unusually long operating history to cannabis. Its greenhouse business dates to 1989. It entered cannabis through the Pure Sunfarms joint venture in 2017, converting existing greenhouse space, and later bought its partner’s remaining stake and a majority of Quebec producer Rose LifeScience. Today it cultivates in Canada and the Netherlands and supplies international medical markets. Its Delta campus is being expanded toward annual production capacity of 160 metric tonnes by mid-2027.

Management attributes the latest margin improvement to record yields, lower production costs, and a better sales mix. The quarterly filing shows how much the commercial side matters: cannabis export revenue increased $8.9 million, while total cannabis revenue rose just $2.7 million. Canadian domestic branded and unbranded sales together fell almost 19%.

Exports supplied 39% of cannabis revenue, up from about 24%. Village Farms began shipping to Germany and Britain in late 2023, and its quarterly filing attributes the export increase primarily to higher volumes shipped to Germany. Export prices themselves fell 16% as bulk flower took a larger share of sales.

The improvement also incurred costs: cannabis gross profit rose $5.9 million, while selling, general and administrative expenses increased $3.6 million. Export demand is therefore central to the improvement. The disclosures leave it less clear how much of the margin gain came from producing each gram more efficiently.

Ultimately, the record has been uneven. Village Farms reported positive annual U.S. GAAP net income in three of the eight years from 2018 through 2025: 2019, 2020 and 2025. The 2020 result included a $23.6 million acquisition gain. 

The recent turnaround has stronger cash evidence: across 2025 and the first half of 2026, continuing operations generated $50.2 million of operating cash against $33.7 million of property-and-equipment spending, leaving $16.5 million before other investment, debt repayments and distributions.

That cash generation was uneven: taxes and working capital pushed first-half 2026 operating cash flow below zero. Meanwhile, the roughly C$10 million Delta 2 conversion adds capacity to a greenhouse financed earlier. 

Its eventual return will depend on selling the additional production as the facility reaches full output in 2027.

What Vireo is buying

Vireo’s own record shows annual net losses in all eight years from 2018 through 2025, most of them preceding its current acquisition program. The 2025 loss was $68.1 million. That record makes the economics of the businesses being added especially important.

Three private operators acquired in 2025—Wholesome, Proper and Deep Roots—were already profitable. Their audited 2024 statements show combined operating cash flow of $45.3 million against $21 million of property-and-equipment spending. The acquisition consideration, plus assumed financial debt and less acquired cash, came to approximately $259 million before leases and other obligations. Their historical cash flows reflect interest and tax-payment timing, so dividing the cash surplus by that purchase cost would not establish an investment return.

The acquired cash needs the same discipline. 

Across 2025 and the first half of 2026, acquisitions added $101.4 million of cash net of cash paid in the deals, against $18 million generated by operations. Cash is an asset included in the transaction’s valuation and deducted when estimating the cost of the operating business. Its arrival on the balance sheet does not itself create value. Paying largely in shares preserved liquidity, while existing shareholders surrendered part of their ownership: Vireo’s subordinate voting share count rose almost 28% in the first half of 2026, adjusted for its share consolidation.

Hawthorne illustrates the trade. 

Vireo acquired the gardening supplier from Scotts Miracle-Gro (NYSE: SMG) in April, recording $104.9 million of share-and-warrant consideration and receiving $35 million of cash. Hawthorne’s separate accounts show that it consumed $8.9 million of operating cash in fiscal 2025. Vireo obtained liquidity and a business requiring improvement. The $21.7 million bargain-purchase gain recognized at closing was an accounting gain, excluded from adjusted EBITDA.

Still, there is commercial progress: on the company’s pro forma basis, cannabis sales rose about 9% year over year in Q2. 

The presentation treats selected acquisitions, including the PharmaCann Colorado assets acquired after June, as though they had occurred earlier. It suggests that the enlarged portfolio’s sales growth extended beyond the increase created by consolidation, although it does not establish the return earned on the acquisitions.

Figure 2. Company SEC filings and annual results. The accompanying reporting notes identify the source for each year and explain changes in scope and accounting.

A Cautionary Tale from Schwazze

One of the most relevant precedents for Vireo’s acquisition strategy is now inside the company. Schwazze (OTC: SHWZ) paid approximately $118 million for 13 Star Buds dispensaries, completing the purchases in March 2021. The consideration included $44.25 million in seller notes. That December, it announced $95 million of secured convertible notes to fund acquisitions and expansion, carrying 13% interest: 9% in cash and 4% added to principal. On the original balance, that meant $8.6 million of annual cash interest before servicing its other debts.

Schwazze kept expanding into a deteriorating market. Colorado’s legal cannabis sales fell from $2.23 billion in 2021 to $1.40 billion in 2024, a decline of about 37%. Financial reporting then compounded the pressure: the company’s December 2024 disclosure identified reporting defaults and accounting errors requiring restatement of its 2022 and 2023 accounts. Those earnings statements cannot support a confident reconstruction of its operating decline.

While the accounting problems made Schwazze’s deterioration harder to assess, its mounting financial distress soon became impossible to ignore.

In March 2025, a subsidiary missed roughly $700,000 of principal and interest on a separate loan. The creditor swept approximately $1.5 million from its bank accounts. A year later, 45 dispensaries and two manufacturing facilities passed to a Vireo-controlled company through creditor enforcement.

For Schwazze, acquisitions created fixed financing obligations while the market contracted, and reporting failures further weakened the company’s position. Vireo’s purchase allocation still recorded $72.5 million of financial debt and $31.6 million of lease liabilities in the restructured operation. Those obligations remain part of the cost of operating the acquired businesses.

What remains for shareholders

Vireo has improved some financing terms. In October, it replaced a $49 million property note carrying 15% interest with a $60 million loan at 8.5%, also financing a Florida property purchase and related costs. Annual interest on the opening principal falls from approximately $7.35 million to $5.10 million before fees and amortization. Principal payments begin after six months, and a separate $41 million subordinated loan remains.

But reducing borrowing costs does not resolve the question of how much cash Vireo’s operations actually generate. Its operating cash also depends heavily on tax positions. Its first-half filing reports a $20.4 million net loss and $14.3 million of operating cash flow. The cash-flow reconciliation includes a $29.8 million increase in uncertain-tax-position liabilities. 

Removing that single positive adjustment produces a negative $15.5 million. This calculation illustrates the contribution of that adjustment; it does not estimate a current tax payment. Tax accruals supported cash retention while the associated expenses remained in reported earnings.

Vireo has challenged Section 280E in its tax returns, but its June filing applies medical cannabis tax relief only from April 23, 2026, leaving earlier liabilities unresolved. Meanwhile, its $14.3 million in operating cash flow fell short of $28.8 million in property and equipment purchases, even excluding the $90.2 million acquisition of its previously leased New York facility.

Village Farms has demonstrated a recent improvement supported by export demand and cash generation, against a history of intermittent profitability. Vireo has bought established businesses and preserved liquidity through equity consideration, but its first-half operating cash depended substantially on tax accruals and fell short of investment even after excluding the large New York property purchase. Its acquisitions include businesses that were already profitable; the combined group’s cash results have yet to establish the return their new owners will retain.

Editor’s Note: Readers can access the original financial reports and supporting disclosures referenced in this analysis through Vireo Growth’s Q2 2026 results and Village Farms International’s Q2 2026 results.

As cannabis operators navigate capital-intensive expansion, tax uncertainty, and mounting pressure to generate sustainable cash flow, these questions will take center stage at IgniteIt’s Capital & Policy Summit in Washington, D.C., on November 18. The event will bring together industry executives, investors, and policymakers to examine the financial and regulatory decisions shaping the next phase of the U.S. cannabis industry.