'Perfect Storm' for Cannabis M&A in 2023

Small and midsize companies will see the most activity.

While the capital fundraising scene for cannabis companies in 2022 contracted considerably from the year prior, the outlook for 2023 is for a spike in mergers and acquisitions, several experts indicated this week.

That will be particularly true for smaller and mid-size companies, a number of industry observers said, instead of the high-dollar acquisitions that have made headlines in recent years, with large-scale multistate operators gobbling each other up.

“(U.S.) MSOs raised about $5.1 billion in 2021, and last year, that figure was down to about $1.2 billion,” noted Canadian Securities Exchange CEO Richard Carleton during an industry panel on Thursday.

Big MSOs Get Money

But, Carleton noted, bigger U.S.-based MSOs that trade on the CSE are “still getting financing done.”

“The MSO’s that are able to lever the public markets for continued access to capital are in fact able to get stronger, and take advantage of the new states coming online, to do acquisitions of distressed assets in the jurisdictions they’re currently working,” Carleton said.

Though Carleton noted that the fundraising trend was part of a broader economic downturn in investing for companies of all stripes, another panelist said it’s precisely that type of atmosphere that has primed the U.S. cannabis industry for a “perfect storm” of M&A.

Bullish On M&A

“I’m actually very bullish on M&A” for 2023, said Zachary Kobrin, a Florida-based partner at Akerman LLP.

“I just think, the next 18 months, there’s going to be a flood of M&A, but small M&A,” Kobrin said, echoing a point by Carleton that leading MSOs are still able to obtain financing for expansion plans.

“We’ll see a bunch of $5 million acquisitions. Instead of one MSO buying another MSO, one MSO may just scoop up a bunch of dispensary licenses in Illinois or a bunch of smaller licenses in Maryland,” Kobrin predicted.

That analysis is supported in part by the New York-based Viridian Capital Advisors Deal Tracker, which reported this past week that capital raises are down in the first week of 2023 by 95.7% from the first week of 2022.

That set the stage for Viridian’s not-so-rosy outlook for the coming year, which it predicted would be full of cannabis company failures and distressed assets ready for acquisition deals.

“The pain in 2023 will revolve around business failures, which we expect to set new records,” Viridian forecasted. “We expect the capital market slowdown … to result in an upswing in M&A activity. MSOs will find buying distressed companies to be a more cost-efficient method of expanding capacity or entering new markets.”

Long term, however, that should make for a healthier nationwide cannabis industry overall, Viridian predicted.

John Schroyer

John Schroyer has been a reporter since 2006, initially with a focus on politics, and covered the 2012 Colorado campaign to legalize marijuana. He has written about the cannabis industry specifically since 2014, after being on hand for the first-ever legal cannabis sales on New Year’s Day that year in Denver. John has covered subsequent marijuana market launches in California and Illinois, has written about every aspect of the marijuana trade, and was part of the team that built the cannabis industry’s first-ever trade show, MJBizCon. He joined Green Market Report in 2022.

Leave a Reply

Your email address will not be published. Required fields are marked *

Get the latest cannabis news delivered right to your inbox

The Morning Rise

Unpack the industry with the daily cannabis newsletter for business leaders.

 Sign up

About Us

The Green Market Report focuses on the financial news of the rapidly growing cannabis industry. Our target approach filters out the daily noise and does a deep dive into the financial, business and economic side of the cannabis industry. Our team is cultivating the industry’s critical news into one source and providing open source insights and data analysis


Recent Tweets

Get the latest cannabis news delivered right to your inbox

The Morning Rise

Unpack the industry with the daily cannabis newsletter for business leaders.