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 06/23/2023
- One M&A transaction closed this week for $154.22M compared to three transactions for $5.24M in the prior year.
YTD Activities
- Fifty-nine transactions totaling $1,097.1M have closed YTD, compared to one hundred and three transactions for $3,813.5M last year.
- The 2023 YTD average transaction size of $18.6M is the lowest in recent years.
Pending Risk Deal Arb Analysis
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- The Cresco/Columbia deal spread dropped over 1000bp to 83.1% on 6/23/23. The arb spread indicates the market does not believe this deal will close as presently structured. The spread may also relate to the relative credit qualities of the two companies. Columbia Care “needs” the deal to close as its long-term liquidity profile is challenging as a standalone, whereas Cresco is somewhat better positioned. Columbia plans to achieve positive operating cash flow in 2023 through better working capital management and additional cost savings. A collapse of this headline transaction would be negative for the whole industry.
Valuation Gap Analysis
- The valuation gap widened by 3bp to 3.90 on 6/23/23, its highest reading since 9/2/22. 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 still 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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