Most cannabis founders need liquidity and believe the only way to get it is to sell the company. And if they do sell, they’re not getting much for it.
The standard menu looks like this: sell to an MSO, take private equity money, or keep grinding. Founders treat these as the only options because the industry talks about them as if they’re the only options. They’re not. But the alternative I’m going to describe doesn’t generate press releases, so it stays quiet.
Here’s the situation most founders are actually in. They’ve been paying themselves below market for years. They’ve plowed everything back into the business. They’re sitting on equity that looks meaningful on paper but doesn’t translate into anything they can spend. And the M&A market that was supposed to solve this has largely failed them. MSOs pulled back on acquisitions when their own balance sheets got ugly. The buyer universe is thin. The offers that do come in are insulting. The founders carrying the most theoretical value are often the most cash-poor people in their own companies.
So founders are stuck in a position where selling means giving up control, culture, team, everything that makes the business what it is, in exchange for a number that probably disappoints them anyway. And not selling means continued illiquidity with no clear end date. This is presented as an either/or. It isn’t.
An Independent Buyout is a transaction where the founder sells shares, not necessarily all of them, often thirty or forty percent, to a trust set up for the company’s employees. The founder walks away from closing with a large cash payout. The remaining balance, if there is one, gets covered through seller notes, but the cash is the bulk of it. The company gets to deduct the entire purchase price. The company stays independent. Leadership doesn’t change. Employees end up with an ownership stake. There is no outside buyer. No fund manager. No integration playbook. No ticking clock.
The part that matters most in cannabis is taxes. A company that reaches full employee ownership through this structure stops paying federal and state income tax. Even if cannabis gets rescheduled and 280E goes away, it doesn’t matter. The company still pays zero income tax. All that cash gets redirected to debt service, operations, growth, whatever the business actually needs. And if the employee-owned company acquires other businesses, those get structured the same way. The tax benefit cascades.
There’s a secondary effect worth noting. People who own a piece of what they’re building tend to perform differently. This isn’t a feel-good talking point. In cannabis specifically, where execution quality is directly tied to compliance outcomes and customer retention, the operational impact of employee ownership is measurable. You want your team thinking like owners? Make them owners.
Three objections come up reliably. One: the founder takes a discount by selling to employees instead of the open market. Wrong. The company gets an independent valuation and the founder sells at fair market value. Two: it’s slow and complicated. Relative to a multi-bidder M&A process with months of diligence and negotiation, it’s simpler. Defined steps, clear timeline, predictable result. Three: this is a structure for big manufacturing companies in Ohio, not cannabis operators. Also wrong. The qualifying characteristics are operational, stable cash flow, competent leadership, a business that doesn’t fall apart when the founder takes a week off. Industry and size aren’t the relevant variables.
The deeper issue is that founders have been conditioned to think about exits as a single event where they hand over the keys and walk away with a check. The Independent Buyout doesn’t work like that. It’s a partial transaction that generates real liquidity while preserving ownership, control, and upside. The founder takes chips off the table, enough to matter personally, and keeps playing the hand.
For founders who’ve been waiting on the M&A market to come back, or waiting for a buyer who values the business the way they do, or just waiting: this is a different door. Whether it’s the right one depends on the specifics. But the number of cannabis founders who should be evaluating it and aren’t is, in my estimation, very high.
Darren Gleeman is the Managing Partner of MBO Ventures, a firm focused on business exits through a structure called an Independent Buyout.
An Independent Buyout uses a federally authorized employee trust (an ESOP trust) to purchase stock directly from a company’s founders. It is a unique trust that can acquire company stock and use third-party financing to complete the transaction. Instead of selling to private equity, the owner sells to this trust, creating liquidity while transitioning ownership to employees under a tax-advantaged structure.
Using the Independent Buyout structure, founders can achieve liquidity while deferring capital gains taxes, the company will completely eliminate federal and state income tax (making 280E irrelevant) and the transaction is structured to preserve significant future upside for the seller.
MBO Ventures focuses exclusively on helping owners exit their businesses without selling out—preserving culture, maximizing after-tax proceeds, and creating long-term upside through warrant strategies.
Before founding MBO, Darren was the Managing Partner of GB Trading, a hedge fund focused on quantitative strategies. He brings a deep understanding of finance, structure, and execution to every transaction. Darren has led almost every single ESOP-structured Independent Buyout in the cannabis industry to-date, and was named Top Financial Advisor by Green Market Report in 2024.
