Regardless of when you embarked on your cannabis entrepreneurial journey, there comes a time when an exit ramp looks attractive. Is that time … now?
Five years ago, you probably could’ve sold your cannabis business in the U.S. for five to six times your annual revenue – or eight to 10 times your EBITDA (earnings before interest, taxes, depreciation, and amortization), depending on your company, of course, and your market segment. Today those multiples are closer to one to three times your revenue and four to five times your EBITDA, based on recent mergers and acquisitions (M&A) in the sector. Quite a falloff from the frothy, hypergrowth days of 2021 and 2022, when cannabis was being legalized in a handful of states and investors were betting big on expansion.
While a possible federal rescheduling of marijuana from a Schedule I controlled substance to Schedule III could certainly help revive a dealmaking frenzy in the industry, for now company founders and executives will have to contend with a far more strategic and selective M&A market.
Related: DEA Judge Halts Cannabis Rescheduling Process, May Reopen Hearing Record
The deals that are getting done today reflect a targeted approach to growth, consolidation, and exits. According to Viridian Capital Advisors, 61 M&A, equity, and debt transactions closed in the first half of 2026, totaling approximately $2.22 billion in disclosed capital – almost double the $1.18 billion recorded in the same period last year. “But the story was one of two distinct speeds: an exceptionally active first quarter driven by a wave of top-tier MSO [multi-state operator] refinancings, followed by a markedly quieter second quarter as operators paused major capital decisions ahead of the June 29 [Drug Enforcement Agency] rescheduling hearing,” Viridian wrote in its most recent “Cannabis Deal Tracker” report. As the law-firm Dykema observed in a similar report, recent cannabis transactions have mostly involved “strategic entry into specific market segments (for example, testing), combinations of well-managed operators, and equity holders exiting the space.”
Despite the challenges facing today’s cannabis M&A market, there are still plenty of dealmaking opportunities for businesses with strong operations and a clear path to profitability. Drawing on interviews with M&A experts, these are the five characteristics that buyers are looking for in acquisitions today.
1. A Clear Growth Trajectory
Without question, delivering consistent growth in the cannabis industry is one of the hardest things you’ve had to do. A brilliantly timed market entry or a product innovation can create a burst of episodic growth, but few companies can demonstrate growth year in and year out, especially amid the disruptions and uncertain economy we’ve experienced during the 2020s.
Michael MayesCourtesy of Quantum 9, Inc.
Yet it’s your company’s future growth potential that will determine how buyers value your business. In today’s cannabis M&A market, the biggest premiums are being paid for operators in markets where there is still “a lot of meat on the bone,” says Michael Mayes, the founder and CEO of Quantum 9, Inc., a cannabis consulting firm.
“Historically, some of the highest multiples we see are during the first year or so of a new market, when licenses are scarce, competition is limited, and there is still a significant amount of growth ahead,” Mayes explains. “As a market matures and more licenses come online, those multiples usually start coming back to earth. Buyers will pay for scarcity and future opportunity. They’re much less excited about paying a premium for a business where most of the growth has already happened.”
In a newer, highly restricted market like Georgia, for example, an operator license is worth substantially more than one in a more developed or crowded market like Minnesota. Regulatory changes can also shift the calculus, creating new opportunities for buyers in markets where operators stand to benefit from improved economics. Following the recent federal shift of state-licensed medical cannabis to Schedule III, Utah operators have become intriguing takeover targets, according to Tyler Beuerlein, a 13-year cannabis-industry veteran. Medical-only operators in the state will see immediate, massive relief on their federal tax rates (since Internal Revenue Code section 280E does not apply to Schedule III businesses), which means higher recurring revenue, he notes.
Tyler BeuerleinCourtesy of Tyler Beuerlein
Favorable regulatory conditions may open the door, but as Beuerlein underscores, “if an operator has proven consistent cash flow and there is a path for growth, or if the business complements existing holdings in that market, those seem to be driving factors [for acquisitions].
2. Business and Operational Performance Over Time
Growth tells an important story, but buyers also want to see how you’ve fared through the ups and downs.
This is particularly true for retail businesses. Be prepared to show how your dispensaries have performed over time, using year-over-year comparisons to highlight positive trends and address any weaknesses. Scott Greiper, founder and president of Viridian Capital Advisors, says buyers of retail cannabis businesses will look at average transition value, repeat-customer rate, daily transaction volume, gross margin, and revenue per square foot, as well as how many units customers purchase per transition and how heavily you discount products to drive sales.
Operational capabilities matter, too. Offering in-store pickup or delivery can be an advantage, depending on the market, Greiper says. Be ready to explain the competitive dynamics around your location, including population and traffic patterns and the number of licensed dispensaries within a one- to two-mile radius.
Scott GreiperCourtesy of Viridian Capital Advisors
The goal, Greiper adds, is to show buyers not just how your store is performing today, but why that performance is sustainable and where opportunities for future growth still exist.
For cultivation businesses, operational efficiency is just as critical, particularly when measured against competitors. Expect buyers to focus on metrics including cost per pound, yield per square foot, facility utilization, production capacity, and product quality. When those metrics are strong, they’ll also want to know how many harvests the facility can produce each year.
“You can have great yield numbers on a single harvest but if another operator can consistently turn the same rooms more times per year without sacrificing quality, that can have a much bigger impact on annual output and profitability,” Mayes says. Ultimately, buyers are looking at how efficiently the facility converts space time and operating costs into sellable product.”
3. Sound Recordkeeping
The top and bottom line may get a buyer’s attention, but the quality of a company’s records often determines whether a deal closes. Financial records, asset inventories, and the “data rooms” that store these confidential documents must be organized, complete, and easy for new owners to understand and audit as part of the due diligence process.
If your records fail to reflect the current state of your business, a buyer may lose faith in a potential acquisition. Meticulous records free of errors, on the other hand, can influence valuation and drive up asking prices, according to Greiper. Viridian, for its part, often spends months working with clients to get their financial house in order before starting the sale process.
“All these things give off signals to buyers,” Greiper says. “You’re either the real deal and you’re a well-run business, or you’re not.”
Meticulous recordkeeping is essential to any successful deal, but especially in cannabis, where companies often expand state by state and acquisition by acquisition, says Eric Berlin, who leads Dentons’ U.S. and global cannabis teams. Early in the process, buyers often request copies of licenses, only to find that the documents are scattered across dozens of affiliated entities and multiple markets, making them difficult to track down and potentially jeopardizing the deal.
Eric BerlinCourtesy of Dentons
“What acquiring companies want to see is that the cannabis companies have continued to grow up,” Berlin says. “And that you are not just reacting to their current environment, but you have a thoughtful plan for how to navigate it.”
4. A Clean Balance Sheet
Tax, debt, and inventory liabilities greatly affect the economics of a transaction and complicate a deal’s closing. Most deals are conducted on a debt-free basis, meaning sellers need to resolve outstanding obligations after the transaction closes. In other words, if your company is valued at $100 million but you carry $30 million in debt, you may only receive a $70 million offer. A buyer who really wants your business may make exceptions, but don’t assume they’ll pay off your debt. The same goes for taxes.
“Debt is a huge factor, especially as the size of the acquisition increases,” Mayes says. “A company can look very attractive on an income statement, but once you start digging into the debt structure, equipment obligations, taxes, compliance issues, and what it will actually cost to integrate the operation, the deal can look very different.”
Buyers are also leery of any outstanding legal liabilities and the potential costs, delays, and risks they could inherit. For example, a company sued for dumping extraction waste into a river could face significant liability. Similarly, a cannabis operator embroiled in a dispute over a cultivation or retail license could jeopardize a buyer’s ability to continue operating in that market. Before proceeding, sellers need to understand—and disclose—the scope of any litigation or regulatory dispute and the potential financial and operational consequences for the buyer. Of course, having no or limited legal liabilities helps close deals faster.
Another potential liability is inventory. By accounting conventions, inventory is listed on the assets side of the balance sheet. However, inventory can quickly become a liability for retail cannabis businesses.
If a dispensary consistently sits on products for too long, that usually points to larger operational problems that won’t reveal themselves in revenue transaction count or average ticket size, Mayes says.
“It could be poor purchasing, weak merchandising, bad product selection or simply a team that doesn’t understand how to manage inventory,” Maye says. “A strong retail operation knows what sells, buys accordingly, and keeps product moving.”
5. Limited Governance Friction
Even when a buyer is ready to proceed, internal approval requirements can slow a transaction and even derail it altogether. Some companies, Greiper notes, may need 15 or 20 people to consent to a transaction. Coordinating that many decision-makers can take months, particularly when their interests differ. A shorter, clearly defined list of people authorized to approve the sale can reduce uncertainty and help keep the process moving.
That urgency is not necessarily in the seller’s favor. “Time works to the buyer’s advantage. Time works to the seller’s disadvantage, always,” Greiper says. As a process drags on, a seller can become anxious and more willing to accept a lower offer. Preparing in advance and keeping the parties on schedule can help limit that risk.
Great Companies Are Often Bought, Not Sold
In today’s climate of economic turmoil and regulatory uncertainty, selling your cannabis business is no easy proposition, even if it’s thriving. As Berlin points out, valuations attached to cannabis companies during the industry’s M&A frenzy of the early 2020s were often inflated. Some owners now want to sell because their businesses have failed, the industry and the government have exhausted them, or they have come to terms with the fact that those sky-high valuations were never realistic, he explains.
In the end, a buyer’s opportunity may depend more on your motivations and price expectations than on your growth prospects or the real value of your assets. That makes it especially critical to improve areas where you may be underperforming before attempting to sell. Clarify your revenue picture, get your financial ducks in a row, and remove friction wherever possible.
Ideally, you want buyers coming to you, not the other way around. You command a premium when you create something unique and of high strategic value in the market and buyers compete to acquire it, not when you take it to market yourself or hire a broker to sell it. Remember that great companies are often bought, not sold.
