OUR 9TH YEAR OF PROVIDING PROPRIETARY CAPITAL MARKETS INTELLIGENCE ON THE CANNABIS / HEMP / PSYCHEDELIC SECTORS
Mergers & Acquisitions
Mergers & Acquisitions Summary
Each week, Viridian publishes insights and analysis on completed M&A transactions in the prior week. Our analysis includes:
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- M&A Market Commentary
- Public and Private Companies
- Buyers & Sellers
- YTD M&A Analysis
- M&A by Industry Sector
- Deal Structure and Valuation Analysis
- Pending Deal Risk Arb Analysis
- Valuation Gap Analysis
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Transaction Activities
Week ended 01/19/2024
- There were three closed capital raises in the week ended 1/19/24 for total proceeds of $46M. Three more transactions closed this week than last, with a $46.0M higher volume. Two more capital raise transactions closed this week compared to 2023, with a $42.3M higher volume.
YTD Activities
- Three transactions closed this week for a total disclosed value of $24.11M compared to four transactions for $110.52M in 2023.
- The 2024 average transaction size of $8.04M compared to $27.63M in 2023.
Pending Risk Deal Arb Analysis
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- On the final Friday before the deal was canceled, the Cresco/Columbia deal spread widened to 107.2. No one can pretend to be surprised this deal was canceled. The risk arb spread was inconceivably wide by February and widened further after that. Ultimately, we chalk it up to the near shutdown of the cannabis capital markets. No new investors have been forthcoming to finance the large asset purchases necessary to get the deal done. A sharp divergence in the market valuation of the two companies was another factor. Based on the original deal terms, Cresco was paying much too high of a premium over the trading value of Columbia Care.
Valuation Gap Analysis
- The Valuation Gap
- The Valuation Gap measures the difference between the EV/ NTM EBITDA multiple for the largest MSOs compared to the same multiple for the next smaller group. This measure has been a significant driver of M&A activity since a larger gap creates an opportunity for more accretive transactions.
- The companies used in the large-cap index now include Cresco (CL: CSE), Curaleaf (CURA: CSE), Green Thumb (GTII: CSE), TerrAscend (TSND: TSX), Trulieve (TRUL: CSE), and Verano (VRNO: CSE). The small company index now includes Ascend (AAWH: OTCQX), AYR (AYR.A: CSE), Columbia Care (CCHW: CSE), 4Front (FFNT: CSE), Jushi (JUSHF: OTCQX), and Schwazze (SHWX: OTCQX).
- After the rescheduling announcement, the valuation gap shot upward to 2.72, the highest level since Q1 2022. On 1/19/24, the gap was 2.30, the highest since 9/29/23. Before the HHS announcement, the gap had not been as high as its current read since 2/18/22. The gap tends to widen in up markets and shrink in down markets due to the greater liquidity of the larger cap index.
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