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:

    • 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 11/17/2023

  • Two M&A transactions closed this week for a transaction value of $0.44M compared to three transactions for $74.45M in 2022.

 

YTD Activities

  • One hundred and six transactions totaling $1.70B have closed YTD, compared to one hundred and sixty-six transactions for $87B last year.
  • The 2023 YTD average transaction size of $16.05M is the lowest since before 2018.

Pending Risk Deal Arb Analysis

    • 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. It has fallen to 1.03 in the intervening period but remains ahead of its 52-week average of 0.92. We have noted previously that the gap tends to narrow in down markets as the large-cap stocks trade with greater liquidity.

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