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 04/14/2023

  • One M&A transaction for a total transaction value of $20M closed this week, compared to four transactions for $28.6M in the prior year.

 

YTD Activities

  • Thirty-eight transactions totaling $843.1M have closed YTD, compared to sixty-eight transactions for $2,699.4M last year.
  • The 2023 YTD average transaction size of $22.2M is the lowest in recent years.

Pending Risk Deal Arb Analysis

    • The Cresco/Columbia deal spread narrowed by 840 bp to 64.0% on 4/14/23, still incredibly high given the announced closing timetable. A 64% arb spread screams skepticism that the agreement will survive as presently structured because that return over a three-month horizon seems too good to be true. Analysts seem to be holding to the party line that the deal will close, but why has this spread remained so stubbornly high? Like many of its MSO brethren, Cresco continues to trade near its 52-week low.

   

Valuation Gap Analysis

  • The valuation gap widened to 2.36 on 4/14/23, well below its 52-week average of 2.97. The valuation gap is the difference between the EV/NTM EBITDA multiple for the largest MSOs and the multiple for the less than $300M market cap group, which are their primary targets.
  • This measure has been a significant driver of M&A activity since a larger gap creates an opportunity for more accretive transactions. The gap tends to increase in improving markets while declining in retreating markets to the greater trading liquidity of the larger companies. We believe the current gap is understated by the massive illiquidity of cannabis stocks which may not be accurate indicators of the prices at which the entire companies would trade.

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