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Marijuana laws in the US are starting to feel a bit more relaxed.

In April, the Drug Enforcement Agency (DEA) proposed to ease restrictions on marijuana, moving the substance from a Schedule I classification to a Schedule III under the Controlled Substances Act (CSA).

The move would not directly legalize recreational marijuana at the federal level, but more and more states are approving the substance for non-medical use. Currently, marijuana is legal in 24 states. 

So how do cannabis companies keep their operations above board, especially amid the tricky discrepancies between federal and state laws?

Behind every cannabis dispensary, there are multiple companies keeping the marijuana value chain moving, from production to logistics to distribution to financial services.

In this PE Playbook, the Grata team has put together the need-to-know trends for investors considering making moves in the cannabis market, including:

  • Industry fragmentation
  • Segment distribution
  • Notable acquisitions

The market map above is not intended to be an exhaustive representation of companies in the space.

Companies that provide services that fall into multiple segments are categorized in this report by their primary offering.

Industry Overview

Market Distribution

Geography

Source: Grata

California and Colorado are by far the headiest states, with 854 and 286 cannabis companies headquartered there, respectively. Florida follows in third place with 168 companies.

Recreational marijuana is legal in California and Colorado. In Florida, marijuana is currently only legal for medical purposes, though an initiative to legalize recreational use will be on state ballots this fall. If the measure passes, cannabis investors could be seeing a lot more green in the state.

Ownership

Source: Grata

The vast majority of cannabis companies in the US are independently owned. However, the few publicly traded companies and their subsidiaries account for 40% of industry employees.

With the top 10 companies controlling just 3.4% of the share, the cannabis production segment is currently anyone’s game. This could present an opportunity for investors to dominate the space through strategic acquisitions.

Segment Distribution

Source: Grata

This report focuses on the following segments, all of which provide services that support the infrastructure of the cannabis industry:

  • Production: Companies in this segment include marijuana farms and growers, as well as producers of cannabis products such as prerolls, edibles, and tinctures.
  • Logistics & Supply Chain: This segment comprises companies that support the legal manufacturing and transportation of cannabis products.
  • Distribution: This sector contains dispensaries and other companies that sell cannabis and CBD products.
  • Financial Services: These companies support payments to cannabis companies to ensure that they comply with the relevant controlled substance laws.

Public Comparables

At least 37% of companies in the US cannabis industry are not profitable, according to a recent survey conducted by the National Cannabis Industry Association (NCIA). This is largely due to the unique challenges faced by the cannabis industry, including high taxes, limited access to banking services, and price volatility.

With such a high number of unprofitable companies in the space, EBITDA multiples do not provide much useful information.

Instead, we’ve used enterprise value (EV), gross margins from the last 12 months, revenue from the last 12 months, and year-over-year (YoY) quarterly growth to get a sense of each segment’s performance and value.

Source: Grata

The logistics and supply chain segment leads the pack in terms of EV, gross margins, and revenue. 

While production follows in second place for those three metrics, the segment has the highest YoY quarterly revenue growth by far. 

At the opposite end of the spectrum, the financial services segment has seen minimal YoY quarterly revenue growth.

Source: Grata

The cannabis production sector is the clear industry leader with an average EV/Rev multiple of 7x, compared to the industry average of 2.1x.

Companies in the logistics segment, which provide supply chain and transportation services, also trade significantly above the industry average, with a mean EV/Rev multiple of 3.8x.

Private Comparables

Source: Grata

In the private sector, cannabis production is the clear leader in terms of revenue, growth, and employee count. Production has the fewest number of VC-backed companies (21%) of the segments analyzed in this report. Total funding was not provided for those companies.

The average amount of total capital raised for companies in the logistics & supply chain and distribution segments falls under $1M, signaling an opportunity for investors looking to fund the cannabis value chain.

Notable Acquisitions

Source: Grata

Production: nuEra Cannabis Acquires Ieso Holdings

Illinois-based cannabis cultivation facility Ieso Holdings was acquired by nuEra Cannabis for an undisclosed amount in February 2024.

Ieso is reportedly one of 20 licensed full-scale cultivation facilities in Illinois, with over 36,000 square feet of canopy, according to Cannabis Business Times. 

NuEra CEO Robert Fitzsimmons said the acquisition aims to expand the business’ presence in the Illinois cannabis market and introduce new strains and crop growing techniques.

Similar Companies

If you’re an investor interested in companies like Ieso Holdings, try these:

Note: Only Grata users can access the full company profiles — which include financials, employee and growth estimates, executive contacts, and more — linked above.

Distribution: Silver State Relief Acquires Deep Harvest 

Cannabis cultivation company Deep Roots Harvest was acquired by Silver State Relief for $3.5M in March 2024.

Silver State Relief is a subsidiary of C21 Investments. Sonny Newman, CEO and president of the company, stated that the deal would allow Silver State to expand its footprint in Nevada, a key step in its overall growth strategy, according to the Green Market Report. 

Newman also said he expects Deep Roots Harvest to add significant revenue due to its favorable location.

Similar Companies

If you’re an investor interested in companies like Ieso Holdings, try these:

Note: Only Grata users can access the full company profiles — which include financials, employee and growth estimates, executive contacts, and more — linked above. 

Get the Most Out of the Playbook

If you’re an investor interested in making moves in the cannabis space, Grata can help you put the insights in this article into action.

From in-depth market research to sourcing to pipeline management and relationship nurturing, Grata’s end-to-end dealmaking platform streamlines your workflows so that you can close more deals.

Schedule a demo today to get started.

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