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When it comes to fundraising in the marijuana industry, retail and cultivation businesses still lead the pack, though the number of raises industry-wide over the past 12 months has been slashed almost in half and M&A deal values have fallen off a cliff, Viridian Capital Advisors reported in its sector deal tracker this week.

By the numbers

Retail and cultivation accounted for 51 of the 139 capital raises in cannabis since March 23, 2023, with a total value of $834.5 million, Viridian found. That’s out of a total of $1.7 billion raised among 11 sectors within the broader cannabis industry.

Though there’s nothing new about the retail and cultivation businesses being the most attractive investment opportunities, the number of raises overall dropped 42% from 240 raises for the 12-month period that ended a year ago; the number of retail and cultivation raises dipped 45% from 93 in the same timeframe.

The amount of capital raised in the same timeframe also went down 51%, from $3.6 billion raised in the 12 months that ended in March 2023, Viridian reported.

In second place for the most recent 12 months was the cannabis biotech and pharmaceutical sector, which recorded 29 capital raises for a total of $222.5 million.

But the psychedelics sector was arguably hotter. The segment only reported 16 raises, but those brought in $447.5 million, Viridian found.

The cultivation and retail sector also led the industry in M&A activity, Viridian reported, with 46 M&A deals over the past year, compared to eight in the biotech/pharma sector, 14 in the infused products arena, and 10 in the hemp industry.

Mergers and acquisitions are also down 35% year-over-year, Viridian reported, with a total of 97 deals struck in the past 12 months compared to 150 the year prior. M&A deal values have also plummeted 70% year-over-year to just over $1 billion from $3.6 billion.

Future consolidation

Market consolidation for brands also increased over the past two years, Viridian reported, citing data and analysis from BDSA in its chart of the week, which showed that the top 20 cannabis brands went from controlling around 26% of the market in 2020 to nearly 35% in 2023.

“Further increases in concentration are likely,” Viridian reported, and pointed to the beer industry, where the top five brands account for roughly 60% of all beer sales.

The prediction also takes for granted that marijuana will be reclassified in the U.S. to a Schedule III narcotic from its current status as Schedule I, which Viridian asserted could open the doors to more investment capital. That could spur further consolidation and M&A activity.

“As capital markets reopen after rescheduling, larger, more liquid companies will be the first to benefit from incremental investment in the industry,” Viridian wrote in its chart of the week analysis. “Their cost of capital advantage will make it easier for them to grow relative to their smaller competitors.”

In context, however, even “the largest (multistate operators) today are tiny companies in the landscape of American commerce,” Viridian wrote. “Either they will grow much larger or be acquired by larger companies from outside the industry. There will always be thousands of small cannabis companies, and those with superior marketing skills to establish niche positions with differentiated products will thrive, while those that do not disappear.”

The post Report: Cannabis capital raises, M&A both down significantly year-over-year appeared first on Green Market Report.

420GrowLife

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John Schroyer, KahliBuds, 420GrowLife