Recreational and retail, non-medical cannabis industry was born approximately a decade ago in Washington & Oregon, with the Evergreen State preceding the Beaver State by a couple of years in the legalization of marijuana. In truly a “gentlemen start your engines” race in the entrepreneurial community, the industry has seen strong business models accelerate and lead the business community in providing quality products, superior customer service, and the creation of growing, profitable privately held companies and family-owned businesses. Unfortunately, as is common in an industry in its infancy, there has also been company failures due to poorly executed business models, inferior products, non-compliance with government regulations, and insufficient capitalization. It is anticipated that historic winners and tragic failures in the industry will continue for years as the industry sector grows, evolves, and modifies in coordination with state and federal government regulation.
Firmly established as states of national leadership in technology innovation and entrepreneurship through their private sector companies, the Pacific Northwest is quickly establishing itself in also a leadership position in the cannabis industry in the United States, where as of December 2021, thirty-seven states and 3 US territories have approved marijuana as medically legal with eighteen of them also allowing legal adult recreational use and access to the product. To provide a reference point to the size of the state economies in Washington and Oregon presently, it was documented that the Washington State sales of marijuana exceeded $1.5 billion in 2021 with $9.6 billion in sales since the legalization of cannabis in Washington state. Oregon’s consumers purchased $1.2 Billion of medical and recreational cannabis in 2021.
The cannabis market is expected to continue to grow. The cannabis industry grew 21% from 2019 to 2021 generating $21 billion of revenue per year with expected global market growth to $146 billion by end of 2025.
Cannabis businesses range from traditional growers or farming now referred to as producers to processors who convert cannabis into either edibles or extract them into a variety of Cannabis oils. Dispensaries or now referred to as retail shops act as the storefront for selling directly to consumers. Finally, there are a variety of trade partners who manufacturer and sell specialized cannabis equipment, Cannagear or merchandise as well as specific services tailored for the cannabis industry.
IBA and the
IBA professionals serving the cannabis industry have already gained leading edge, industry specific knowledge & experience through participation as deal facilitators in a variety of transactions in Washington, Oregon, Arizona and Colorado. Current and previous projects worked on by members of the firm include outside, green house, & indoor growing operations, processors creating a spectrum of variations for use from extracts to joints to edibles, and retail shops or dispensaries. Retailers also sell Cannagear, merchandise and other related items. We would welcome the opportunity to talk with any cannabis industry entrepreneurs that would like to discuss selling or acquiring a cannabis / marijuana industry business, leasing or acquiring real estate for this specialized use, or staging a business for future sale. IBA has a long history of successfully facilitating transactions in emerging industries where entrepreneurs are battling at a high velocity for market share & racing to perfect business models that will create competitive advantages.
The members of our cannabis industry transaction team have the ability & knowledge to value, market, address 280E treatment, access alternative financing/capital sources, and successfully negotiate the sale of growing facilities, producer processors, and retail businesses serving the cannabis / marijuana marketplace that are in leased locations or include real estate. IBA professionals have also successfully represented & sold businesses that support the cannabis industry ranging from hydroponic equipment & nutrient businesses to trade contractors such as electricians, plumbers, and heating & air conditioning technicians.
IBA has been a market leading full service mergers and acquisition brokerage firm focusing on the sale and merger of privately held companies and family owned businesses since 1975. We represent the business owner’s best interests employing knowledge, experience, skill, and best practices as their sale side representative for both business and real estate interests. Each of our business brokers are commercially licensed real estate brokers, in one or more states.
We provide a full spectrum of business intermediary services including the valuation and listing of businesses, curating buyers for our listings and the favorable negotiation of business terms from offer to closing the sale. As the business owner(s) intermediary, we successfully navigate the sale to close and avoid common points of deal failure utilizing our unique experience, skill and knowledge. Our Cannabis transaction team understands the nuances of the marijuana industry from 280E to the growing and distribution processes to the limited financing options. IBA is a member of the Washington Cannabis Business Association and works closely with the Liquor and Cannabis Boards in each of the states we serve. Our team has a Rolodex of alternative financing sources to help minimize seller financing exposure and to help prospective buyers access buyer financing. Further, our database of interested buyers for producers, processors, retailers and trade partners is among the largest within the business intermediary market.
Our experience in the cannabis industry has shown business owners will need an experienced and professionally licensed business broker to handle the sale of their cannabis business.
- IBA Helps Owners Sell their Businesses in a Confidential Manner.
- Provides a Professional Opinion of the Market Value of Your Company and Real Estate
- Lists and Markets Your Business for Sale in a Discrete manner
- Vets and Qualifies Buyers
- Negotiates the Most Favorable Prices & Terms Available in the Marketplace
- Facilitates the Transaction to Closing Through Due Diligence, Legal Documentation, Licensing, and Finance Sourcing
- Assists with the Post Sale Transition
This cannabis marketplace is in transformation and will often produce entrepreneurial decision points requiring business owners to select from a menu of management & investment choices ranging from additional investment and business model modification to business sale and acquisition. IBA, as the premier business brokerage firm in the Pacific Northwest in terms of knowledge, experience, and professional skill, is uniquely positioned to serve as a resource to cannabis / marijuana industry entrepreneurs based on our transactional experience involving new & evolving marketplaces and our knowledge and experience working with similar license transition requirements for wineries, distilleries, and other manufacturing, agricultural, and hospitality industry companies.
For more information, contact Seth Rudin, IBA’s Director of its Cannabis Industry Transaction Division. Mr. Rudin who can be reached at 425-454-3052 and via e-mail at email@example.com. He welcomes the opportunity to be a resource and answer questions about M&A activity in the marijuana industry.
State of the Cannabis Industry
The cannabis industry in the US grew 21% from 2019 to 2021 generating $21 billion of revenue per year with expected global market growth to $146 billion by end of 2025. For the state of Washington, the Seattle Times reported that the Washington State Liquor and Cannabis Board showed sales in retail were $1.5 billion in 2021 up $450 million or +43% from 2019 to 2021 fiscal years. (Seattle Times)
In 2021, Cannabis sales added than $550 million in excise taxes for the state of Washington, most of which will be spent on public health programs. Washington’s 39 counties, all but Garfield and Franklin counties have at least one cannabis retailer. Each of these 37 counties retail sales grew by double digits (% growth) from the 2019 to 2021 fiscal years. Yet, sales increases varied in amount from county to county.
Sales in Washington state are expected to grow and to nearly double by 2025. The 2021 MJBizFactbook projects that adult-use sales via retailers will increase approximately 50% by 2025, to $2.3 billion-$2.5 billion. (mjbizdaily)
Cannabis' Impact in the State of Washington
A recent study published in the Puget Sound Business Journal showed that the Washington Cannabis Business Association or (WACA) recently commissioned a consulting firm to conduct a first-ever economic analysis of the state’s regulated cannabis industry.
The consulting firm found that the Cannabis industry directly employed 11,330 industry-specific workers and that the industry’s economic impact totaled $2.7 billion in revenue and 18,360 jobs. However, the same study also found and identified a number of business challenges.
California’s marijuana tax structure is often deemed as the most onerous in the country. But, according to the author, Washington state’s excise tax actually maintains the highest state excise tax, at 37%.
According to the study, if a Cannabis business owner added up all of the taxes with the other state and local taxes, Washington state Cannabis (marijuana) consumers pay an average tax rate of 46.2%.
‘There is no big company’
Washington’s largest individual cannabis retail stores reported under $20 million in 2020 sales, according to data from the state’s Liquor and Cannabis Board, which separates sales data by license number rather than by company. Only nine retail stores earned more than $10 million in revenue that year.
Grower and producer-processor data isn’t as readily available. Those operations vary widely in size, but remain relatively small, report author Spencer Cohen said. For example, Evergreen Herbal, a cannabis product manufacturer that supplies stores throughout the state, reported $6.8 million in 2020 revenue to the Business Journal.
For perspective, Washington’s 100 largest private companies on the Business Journal’s Private Companies List earned revenues of $65 million and up, with the top 10 earning more than $1 billion.
Cannabis' Impact in the State of Oregon
Oregon’s Cannabis industry grew to $1.2 billion in 2021 up 6.5% from the prior according to Oregon’s Liquor and Cannabis Board. Oregon taxes the sale of Cannabis at a rate of 17%. Helping out Oregon’s Cannabis industry is southwestern Idaho residents who cross into Oregon to buy Cannabis related products.
Oregon’s Cannabis grew strong partly because of Covid. Sales are expected to continue to grow at nearly a 20% annual growth rate per the state agency. (Source: kgw.com)
Cannabis' Impact in the State of Arizona
Arizona – 13th state to legalize Marijuana in 2020
Sales have already reached over $1.23 billion in 2021. Cannabis has helped Arizona’s economy in more ways than just sales tax revenues. The state added 2,600 jobs with a growth rate of 31% of Cannabis sales in 2020. The additional labor and taxable income will help the state continue its growing economy. The state has collected over $196 million in state taxes after year 1 of it being legalized for 21 years of age and older.
The University of Arizona is now offering Cannabis related courses to its students as this industry normalizes and matures into a regulated industry like alcohol. The courses will focus on the business, legalities and medicinal uses of Cannabis. (fox10phoenix) (12news)
Please contact our office if you have any questions regarding the representation we provide our clients or if you would like to schedule a time to meet with an IBA professional with experience in the sale of cannabis companies.