CBD Consumer Companies Seeing High Interest, But M&A Future Clouded In Smoke

It’s getting quite crowded out there in the consumer space

With fewer restrictions than ever, buyers are increasingly curious about the smoking hot CBD-infused consumer products space, but industry experts say remaining regulatory uncertainty and the young age of the category could result in more minority investments than buyouts in the near term.

The inflection point for bringing CBD, or the non-psychoactive part of the cannabis plant, into the mainstream was the passage of the 2018 US Farm Bill last December, which lifted restrictions on selling hemp-derived products across state lines. Since then, CBD-derived beauty, personal care and pet brands, among others, have made their way into national retail chains like Walgreens, Sephora and American Eagle Outfitters.

Michael Lux, a Denver-based Partner at accounting firm Crowe, said he expects strategic minority investments to make up the bulk of CBD’s activity over the next 6-12 months. Although many of the industry’s players are “growing like weeds,” he explained that most are younger than five years old and not ready to explore full exits.

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