Green Life Business Group brokers the cannabis industry’s biggest deals

Drew Mathews (Courtesy photo)

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First, the bad news: current market trends show declining valuations for cannabis companies in mature states. The good news is that means increased interest from first-time cannabis buyers, says Drew Mathews, CEO of California-based Green Life Business Group.

“If you’re a buyer, there’s never been a better time in history to get into the industry, meaning prices have never been lower,” Mathews tells MJBizDaily.

“I would say, ‘This is your chance to get in.”

Green Life Business has brokered some of the biggest deals in cannabis in recent years, including sales of companies such as State House, High Times, Element 7, and SLV dispensary. With 400 transactions across 25 states and four countries, Green Life specializes in valuing and selling cannabis businesses, with a strong focus on transparency and relationship-building.

Supported by a team of 12 at its headquarters in San Diego, California, and agents in multiple states, Green Life holds more than 200 current exclusive listings.

“The two most desirable assets right now are either something extremely distressed, so either a very distressed cultivation or retail, just because there’s a lot of ego in the space, and a lot of guys always think they can do it better, right?” Mathews said in a recent interview. “I’ve never met the second best grower in the world.”

“And I’ve also looked at it like this: those assets move very well, but anything that is very profitable also gets extreme attention from new cannabis buyers.”

“Most of the guys that are pulling the trigger on the stuff we’re selling, 10 million plus, a lot of them are buying their very first cannabis business, and they don’t want to buy something and try to figure it out.”

Making cannabis deals: The elephant in the boardroom

With an emphasis on honest representation, Green Life highlights the positives and negatives of each listing, provides free business valuations, and advises sellers based on market conditions. The big market change they are watching is the rescheduling of medical cannabis, with potential adult-use cannabis rescheduling on the horizon.

“If you’re a seller and you’re bullish on cannabis being rescheduled and you have a profitable business… I would say hold on to the business and be able to sell within the first six months,” Mathews said.

“I believe that the first six months will be the highest perceived value for your business. I think it will be where people will offer maybe 5x EBITDA on the business.”

On the other hand, if a business is within the vast majority of cannabis companies that are breaking even or even bleeding, Mathews advised that the time to sell is now.

“If you’re a business that’s breaking even or bleeding, which is 80 to 90% of the listings that are on the market, I would say sell now,” Mathews said.

“And the reason I would say sell now, every single stat that exists has a different multiple for top-line revenue for a business that’s breaking even or bleeding, and that number is dropping every 90 days, and I believe that, about six months to a year from now every single state—whether rescheduling happens or not—every single cannabis business that exists in the whole country will be valued on your EBITDA, your cash flow, you know, what is the net income of the business.”

How to make money in cannabis selling licenses

Mathews is speaking from experience. Green Life sold the first pre-ICO dispensary in Los Angeles that went recreational, Exclusive Caregivers.

“When everybody had those medical licenses in LA back in 2018, and everyone was thinking Los Angeles was going to be the mecca of California, there was one lady, she was the only smart one that said, ‘I am for sale, I don’t care to know what recreational sales will bring,’” Mathews said. “She was doing $3 million in medical sales.”

“We sold it for $10.45 million.”

And since then, the value of dispensaries in California’s recreational market, like all recreational markets across the U.S., has continued to decline.

“I started this company back in 2015, when I would have bet my life on the line that we were going to have full federal legalization by 2018, 2020 at the latest,” Mathews said.

“Back then, my crystal ball said, ‘Okay, by 2020 these things are going to peak.’ That’s why I started the company five years prior, thinking by 2020, you know, this would be a big boom. Here we are, 11 years later, still nothing.’”

Where is the peak of the cannabis market?

Despite the boom’s delay, major sales are still taking place. International markets, especially in Europe, are seeing large all-cash deals and growing optimism, prompting Green Life to expand its global presence. Mathews also noted that the most desirable states for buyers are Arizona, Nevada, New York, New Jersey, and California, with Arizona leading in valuation.

“Arizona has the highest valuation in the country,” Mathews said. “I think it’s because they issued very little licenses compared to the population versus all the other states.”

California is last on Mathew’s list of desirable states, but is also not to be counted out for the future.

“Even though California valuations are down, it’s still the biggest state, and everyone knows that whenever it comes time to sell these businesses or sell a portfolio—I’m talking about to like the companies that are not in cannabis, the Marlboro, the Philip Morrises of the world—when they’re ready to step in, they’re going to be looking at California.

“They’ll be looking at New York, New Jersey, Texas, Florida, stuff like that.”

Green Life cannabis industry guidance

Mathews’ advice for sellers? Profitable businesses should consider selling within six months of rescheduling for best value; distressed businesses should consider selling now as top-line multiples are declining.

And his advice for buyers?

Now is a historically good time to enter the market, given low prices and many distressed opportunities.