What's causing the decline in M&A activity in the cannabis industry?

Mergers and acquisitions in the cannabis industry in 2024 totaled $1.169 billion, a decrease of $579 million – or 33% – from the $1.749 billion of industry M&A the previous year, according to Viridian Capital Advisors.What’s behind the decline? There are several factors, according to Frank Colombo, managing director at Viridian, a New York-based, cannabis-focused investment banking and data analytics firm, who spoke with MJBizDaily about the cannabis industry’s decreasing M&A activity and what it means moving forward.

ADVERTISEMENT What are the biggest reasons behind the decline of cannabis M&A in 2024? Cash is very tight.Over the last two years, cannabis companies have been in cash conservation mode, and a lot of deals have been canceled.

The motivation for M&A has also changed.Going back in time, it was kind of a land grab, companies wanted to be in every state.

Now it’s more of a concentration game.The poster child of the land-grab movement was Acreage (Holdings, a New York-headquartered multistate operator now owned by Canopy Growth Corp.).

A few years ago, Acreage had more states on their map than practically anybody.But they were an inch deep and a mile wide, as they say.

The MSOs have figured out that you just can’t be profitable that way.You have to have concentration in a market to really take advantage of it.

You basically have to have a sizable presence and vertical integration.And you’re not going to be able to do that if you just have one or two dispensaries here and there.

What a lot of these companies have been trying to do is really pick their shots and try to go big in those markets. ADVERTISEMENT What else has dampened M&A? The other thing that has restrained things are stock prices.

You need cash or stock to finance an acquisition.Cash is tight because it’s hard to raise money.

You can’t really sell equit...