Independence vs. Consolidation: The Real Fight in Cannabis Right Now

By Darren Gleeman, Managing Partner, MBO Ventures

Consolidation in cannabis gets talked about as if it were a weather pattern, something happening to the industry rather than something the industry is choosing. Every conference panel, every trade publication, every investor deck accepts the same basic premise: the big are getting bigger, the independents are getting absorbed, and that’s just how mature markets work. The premise is worth pushing back on, because the consolidation happening right now is not primarily a story about scale or efficiency. It’s a story about who has access to capital and under what terms.

A Capital Structure Problem Dressed Up as Strategy

Cannabis has always operated with one hand tied behind its back on the financing side. Federal illegality locked plant-touching businesses out of traditional bank lending for years. The lenders that did show up charged rates that reflected the risk premium of operating in a legally ambiguous environment. Institutional investors that could have provided growth capital stayed on the sidelines while they waited to see how the federal picture developed.

What that created is a market where the operators with the most capital weren’t necessarily the ones with the best businesses. They were the ones with access to the right relationships, the right structures, or the right state license at the right time. MSOs raised capital when the public markets were open to cannabis. Smaller operators mostly didn’t. That funding gap has been widening ever since, and the M&A activity we’re seeing now is largely a consequence of it. 

A founder selling because they ran out of better options is not evidence that consolidation is working the way consolidation is supposed to work, and the whole industry draws the wrong lessons when those two things get treated as the same.

The Binary Operators Are Being Handed

The way the exit conversation gets framed to most cannabis operators goes roughly like this: sell the company and take your liquidity, or keep running it and stay undercapitalized. Both options have real costs that don’t always get spelled out clearly.

Selling to an MSO or a strategic buyer typically means the business gets absorbed into a larger platform. What follows a cannabis acquisition tends to look similar across deals. Teams get restructured to fit the acquiring company’s model, overlapping functions get cut, and operational decisions that used to sit with the founder migrate upward into a corporate structure that has seventeen other things to manage. The founder stays involved in the name longer than in practice. Licenses can be transferred. Deep operational knowledge and local market relationships are harder to move.

Staying independent without capital access means a different set of problems. Growth is constrained, and the business stays subscale at exactly the moment when competitors with institutional backing are expanding. The founder keeps taking on operational risk without the liquidity to show for it, reinvesting earnings back into a business they’ve already put years into building.

What Gets Permanently Lost

Building a regulated cannabis business in the early years was not an obvious career move. The legal ground shifted constantly, banks turned operators away on principle, and the communities these businesses were trying to serve had spent decades on the wrong end of enforcement. The founders who stayed anyway learned things about their markets that you can only learn by being there through the difficult parts. 

What those years of operating actually produced is harder to value than a license or a lease. The relationships with regulators, the vendor arrangements that took years to negotiate, and the team’s specific culture were built person by person over time. An acquisition can transfer the assets. It doesn’t transfer any of that, and most of it quietly disappears somewhere in the integration process before anyone realizes it was worth keeping. At scale, the incentive is standardization, and standardization tends to flatten the things that made individual businesses distinct.

Forced exits also convert ownership into a one-time event rather than a sustained position in a growing market. An operator who sells today because it’s the only viable liquidity path is giving up the upside that comes from owning a piece of a maturing industry over the next decade. That cost tends to be invisible inside the transaction math.

Where Consolidation Actually Belongs in This Conversation

MSOs are a legitimate part of how this industry will develop. Scale creates real advantages in supply chain efficiency, regulatory navigation across multiple states, and the ability to sustain investment in technology and infrastructure that smaller operators can’t justify alone. Some consolidation reflects genuine strategic logic, and operators who sell to larger platforms on terms they’re satisfied with are making reasonable decisions.

The issue is that consolidation has become the default outcome for operators who want liquidity, regardless of whether it’s actually the right fit for the business. A market with only one viable exit path is not a market making good capital allocation decisions. It’s a market working around a structural gap.

The Path That Mostly Goes Unmentioned

Independent buyouts work by allowing a founder to sell shares to an employee ownership trust rather than to an outside buyer. The company gets professionally valued, a purchase price is negotiated, and the founder receives proceeds at closing. The trust, funded through a combination of seller financing and the company’s own cash flow, becomes the buyer. Three things happen as a result that don’t happen in a conventional sale: employees become owners with a direct financial stake in the company’s performance, the founder accesses real liquidity without handing the business to an outside acquirer, and the company stays independent rather than getting absorbed into a larger platform.

That combination is what the cannabis market has largely been missing. Independent buyouts create a way to access capital without giving up control, and in an industry where the forced choice between liquidity and independence has pushed a lot of good operators into exits they weren’t fully ready for, that matters more than it might in a sector with deeper financing options. Founders also don’t have to sell everything at once. A transaction covering thirty or forty percent of equity can provide real personal liquidity while leaving the majority of ownership and upside intact.

The tax dimension is harder to overlook in cannabis than it would be in other industries. A company that reaches full employee ownership through this structure can operate free of federal and state income tax, which in practical terms means the cash that 280E has been routing to the IRS stays inside the business. For an operator who has been watching effective tax rates compress margins for years, that’s not a minor efficiency gain.

Why This Model Fits the Industry’s Actual Values

Cannabis is a labor-intensive business. A dispensary doesn’t run on capital and licenses. It runs on the person behind the counter who knows the product, knows the customer, and knows what a compliance issue looks like before it becomes one. That knowledge accumulates slowly and walks out the door fast, and most operators who have lost key people mid-growth can tell you exactly what it cost them.

The industry talks constantly about its workforce and the communities it grew out of, but the ownership models that dominate the market don’t reflect any of that. When the people running the business own a stake in its outcomes, the incentive structure shifts in ways that matter operationally, and in an industry where execution quality at the store level drives compliance outcomes, customer retention, and ultimately enterprise value, that shift is worth something real.

What gets traded away quietly in a platform acquisition is local judgment. The operator who built a business in a specific market spent years learning what works there, which regulators to call, which vendors to trust, and which customers to take care of. That knowledge doesn’t transfer cleanly into a multi-state structure optimized for consistency across dozens of locations. Businesses that stay independent keep that judgment in-house, and ownership models that include the workforce keep the people who carry it invested in outcomes.

What the Industry Chooses to Build

The structure of capital will determine the structure of the industry, and that outcome is still being determined rather than settled. One version of the next decade looks like continued capital-driven consolidation, where the market becomes progressively more homogenous, and the industry’s long-term upside concentrates in the hands of institutional investors who arrived late and priced their capital accordingly. The other involves a more balanced ecosystem where MSOs and well-capitalized independents coexist, founders have genuine choices about how to access liquidity, and ownership is distributed more broadly across the people who actually built these businesses.

Operators who built their businesses through years of regulatory uncertainty, compressed margins, and a lending environment that treated them as second-class borrowers deserve more than a thin market and weak terms when they finally want to take something off the table. The tools to give them better options exist. Whether the industry takes them seriously enough to change the default outcome will shape what cannabis looks like when the current consolidation cycle runs its course.

Author Bio:

Darren Gleeman is the Managing Partner of MBO Ventures, a firm focused on business exits through a structure called an Independent Buyout.

An Independent Buyout uses a federally authorized employee trust (an ESOP trust) to purchase stock directly from a company’s founders. It is a unique trust that can acquire company stock and use third-party financing to complete the transaction. Instead of selling to private equity, the owner sells to this trust, creating liquidity while transitioning ownership to employees under a tax-advantaged structure.

Using the Independent Buyout structure, founders can achieve liquidity while deferring capital gains taxes, the company will eliminate federal and state income tax (making 280E irrelevant), and the transaction is structured to preserve significant future upside for the seller.

MBO Ventures focuses exclusively on helping owners exit their businesses without selling out—preserving culture, maximizing after-tax proceeds, and creating long-term upside through warrant strategies.

Before founding MBO, Darren was the Managing Partner of GB Trading, a hedge fund focused on quantitative strategies. He brings a deep understanding of finance, structure, and execution to every transaction. Darren has led almost every single ESOP-structured Independent Buyout in the cannabis industry to-date, and was named Top Financial Advisor by Green Market Report in 2024. 

Disclaimer: The views, thoughts, and opinions expressed in this article belong solely to the author and do not necessarily reflect the official policy, position, or consensus of IgniteIT.