Thinking About Selling Your Company? Here’s What Cannabis Buyers Are Really Looking For

The cannabis M&A market seems to be picking up again. However, industry leaders gathered on stage at the Chicago Marriott Downtown Magnificent Mile for the IgniteIt Cannabis Capital Conference this past June are of the stance that operators shouldn’t get ahead of themselves. Referring to regulations, capital markets, and financing that are still changing, they cautioned that a disciplined approach remains essential during a panel moderated by Irina Dashevsky, partner and co-chair of the Cannabis Law Group at Greenspoon Marder.

Executives and advisors discussed where deals are happening, how valuations are changing, and whether Employee Stock Ownership Plans (ESOPs) are emerging as a viable alternative to traditional exits.

Cannabis Deal Activity Returns, But Caution Remains Priority

Camilo Basto, Partner at Highgate Capital Partners, said cannabis M&A remains highly fragmented and must be evaluated on a state-by-state basis.

“M&A in cannabis is really segmented,” Basto said. He identified the main drivers behind transaction activity, including regulatory frameworks, license caps, and market structure.

He said Ohio, Massachusetts, Texas, Georgia, and Virginia are states that are attracting interest at the time.

Basto also noted that lenders are increasingly taking control of distressed cannabis assets, adding that debt enforcement is reshaping ownership industry-wide.

“One of the major trends that we see is debt holders taking out equity holders,” he said.

According to Nicole Stark, CEO of Bloom Medicinals, companies should only pursue acquisitions that create real strategic value.

That said, Bloom Medicinals has already reached Ohio’s retail license cap. Nowadays is working on expanding through other parts of the supply chain.

Stark pointed out lack of institutional capital as a consequence of the lack of regulatory clarity is what limits broader M&A activity.

Regulatory Shifts And Public Market Moves Spark New Optimism

Jared Maloof, co-founder and CEO of Standard Wellness, emphasized the importance of license caps, explaining that while protecting existing operators, they also limit growth opportunities.

Even though cannabis has rarely offered ideal timing for exits, Maloof said recent developments, referring to medical cannabis rescheduling and Trulieve’s uplisting to the NYSE, have made him more optimistic.

“For the first time in almost eight years, there’s meaningful equity capital starting to enter into the space,” Maloof said. “While it’s just a drip right now, I expect in the next eight months that it will increase in velocity.”

The panelists also touched on the fact that interest in Employee Stock Ownership Plans (ESOPs) as an alternative exit strategy is on the rise.

Darren Gleeman, CEO of MBO Ventures, described an ESOP as an “independent buyout,” under which a company is sold to an employee-owned trust rather than to a strategic buyer or private equity firm.

In the cannabis industry, this structure is being explored not only as an employee ownership model but also as a tax-efficient succession strategy.

Gleeman argued that owners can receive a fair price, keep control of their business, and potentially postpone capital gains taxes with the right deal structure. He further said ESOP-owned companies may receive federal tax benefits that leave them with more cash to invest in the business.

Bloom Medicinals’ Stark didn’t seem convinced. “This is not long-standing in the cannabis industry,” she said of cannabis ESOPs. “This has not been tested.”

She questioned whether ESOP valuations would stand up to IRS review, while adding that there are high upfront costs on the table.

Highgate Capital Partners’ Basto said ESOPs are one way for operators to exit, adding that they may soon have more options. That is, if regulations continue to improve and public markets get stronger, mergers and acquisitions would give operators additional ways to cash out.

As capital markets continue to evolve and more operators begin evaluating acquisitions, succession planning, and strategic exits, these conversations are becoming increasingly important for cannabis executives. IgniteIt’s Cannabis Capital Conference returns to Denver, Colorado, on September 18, bringing together CEOs, investors, dealmakers, lenders, attorneys, and advisors to discuss the trends shaping the next generation of cannabis M&A, capital formation, and business growth. For operators considering what’s next, it will be an opportunity to hear directly from the people helping define the industry’s future.