The industry began very “grassroots,” with individual caregivers growing marijuana after the state originally approved medical use in 2008 and over the years they emerged as sellers as rules changed, said Denise Pollicella, founder and managing partner of Howell-based Cannabis Attorneys of Michigan.
“So you’ve got tons and tons and tons of small, literally mom-and-pop cannabis companies all over Michigan,” Pollicella said. “I like it, I prefer it, I like keeping the business in Michigan … But we do make a concerted effort to educate our clients on, listen, you need to be either a big fish or a little fish and you’re going to need to make that decision very quickly.
“There’s no parking on the dance floor in this industry.”
Many of the small-scale players weren’t started by business-minded folk, Pollicella said. They may not be as focused on planning for the future and they likely don’t have access to the capital needed to scale up significantly. Some are resistant to selling and want to be left alone, while others may be tired and looking for a payout and thinking, “How can I get acquired?”
M&A activity in Michigan cannabis has ramped up in the last year or two and Pollicella expects more consolidation soon.
There’s also, of course, always been a large conversation around corporatization of the cannabis industry.
There’s some criticism among cannabis entrepreneurs — and consumers — of the seemingly ever-looming monolith of big business, Pollicella said.
“I think there’s a lot of push-back in Michigan by small businesses (against larger corporations) … and some of it’s just human nature, ‘We just started our business, let’s not monopolize this industry quite yet,'” Pollicella said. “I don’t want to see all of the manufacturing consolidated in a few companies. I want to see this (industry) sort of mature first.”
There are also some Michigan operators that stand out for their sheer size. Mains said Michigan may just get its first home-grown cannabis IPO this year.
Though he won’t name them, Mains says there are two to three Michigan companies with the potential to go public.
“You’re starting to see some people, I think, position themselves for a going-public transaction, whether that’s just increasing the number of licenses they have or smaller acquisitions,” Mains said. “Or you’ve got some homegrown Michigan companies that I’m seeing are starting to expand into other states … which I would also think is probably a step towards going public.”